Section 1.
This Decree shall be known as ‘The (c) As used
Insurance Code’.
Section 2. Whenever used in this Code, the
following terms shall have the respective
meanings hereinafter set forth or indicated,
unless the context otherwise requires:
(a) A contract of insurance is an agreement
whereby one undertakes for a consideration to
indemnify another against loss, damage or
liability arising from an unknown or contingent
event.
A contract of suretyship shall be deemed to be
an insurance contract, within the meaning of
this Code, only if made by a surety who or
which, as such, is doing an insurance business
as hereinafter provided.
(b) The term doing an insurance
business or transacting an insurance
business, within the meaning of this Code,
shall include:
(1) Making or proposing to make, as insurer,
any insurance contract;
(2) Making or proposing to make, as surety,
any contract of suretyship as a vocation and
not as merely incidental to any other legitimate
business or activity of the surety;
(3) Doing any kind of business, including a
reinsurance business, specifically recognized
as constituting the doing of an insurance
business within the meaning of this Code;
(4) Doing or proposing to do any business in
substance equivalent to any of the foregoing in
a manner designed to evade the provisions of
this Code.
In the application of the provisions of this Code,
the fact that no profit is derived from the making
of insurance contracts, agreements or
transactions or that no separate or direct
consideration is received therefor, shall not be
deemed conclusive to show that the making
thereof does not constitute the doing or
transacting of an insurance business.
in this Code, the
term Commissioner means the Insurance
Commissioner.
CHAPTER I
THE CONTRACT OF INSURANCE
TITLE 1
WHAT MAY BE INSURED
Section 3. Any contingent or unknown event,
whether past or future, which may damnify a
person having an insurable interest, or create
a liability against him, may be insured against,
subject to the provisions of this chapter.
The consent of the spouse is not necessary for
the validity of an insurance policy taken out by
a married person on his or her life or that of his
or her children.
All rights, title and interest in the policy of
insurance taken out by an original owner on the
life or health of the person insured shall
automatically vest in the latter upon the death
of the original owner, unless otherwise
provided for in the policy.
Section 4. The preceding section does not
authorize an insurance for or against the
drawing of any lottery, or for or against any
chance or ticket in a lottery drawing a prize.
Section 5. All kinds of insurance are subject to
the provisions of this chapter so far as the
provisions can apply.
TITLE 2
PARTIES TO THE CONTRACT
Section 6. Every corporation, partnership, or
association, duly authorized to transact
insurance business as elsewhere provided in
this Code, may be an insurer.
Section 7. Anyone except a public enemy may
be insured.
Section 8. Unless the policy otherwise
provides, where a mortgagor of property
effects insurance in his own name providing
that the loss shall be payable to the mortgagee,
or assigns a policy of insurance to a
mortgagee, the insurance is deemed to be
upon the interest of the mortgagor, who does
not cease to be a party to the original contract,
and any act of his, prior to the loss, which
would otherwise avoid the insurance, will have
the same effect, although the property is in the
hands of the mortgagee, but any act which,
under the contract of insurance, is to be
performed by the mortgagor, may be
performed by the mortgagee therein named,
with the same effect as if it had been performed
by the mortgagor.
Section 9. If an insurer assents to the transfer
of an insurance from a mortgagor to a
mortgagee, and, at the time of his assent,
imposes further obligations on the assignee,
making a new contract with him, the acts of the
mortgagor cannot affect the rights of said
assignee.
TITLE 3
INSURABLE INTEREST
Section 10. Every person has an insurable
interest in the life and health:
(a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly
or in part for education or support, or in whom
he has a pecuniary interest;
(c) Of any person under a legal obligation to
him for the payment of money, or respecting
property or services, of which death or illness
might delay or prevent the performance; and
(d) Of any person upon whose life any estate
or interest vested in him depends.
Section 11. The insured shall have the right to
change the beneficiary he designated in the
policy, unless he has expressly waived this
right in said policy. Notwithstanding the
foregoing, in the event the insured does not
change the beneficiary during his lifetime, the
designation shall be deemed irrevocable.
Section 12. The interest of a beneficiary in a life
insurance policy shall be forfeited when the
beneficiary is the principal, accomplice, or
accessory in willfully bringing about the death
of the insured. In such a case, the share
forfeited shall pass on to the other
beneficiaries, unless otherwise disqualified. In
the absence of other beneficiaries, the
proceeds shall be paid in accordance with the
policy contract. If the policy contract is silent,
the proceeds shall be paid to the estate of the
insured.
Section 13. Every interest in property, whether
real or personal, or any relation thereto, or
liability in respect thereof, of such nature that a
contemplated peril might directly damnify the
insured, is an insurable interest.
Section 14. An insurable interest in property
may consist in:
(a) An existing interest;
(b) An inchoate interest founded on an existing
interest; or
(c) An expectancy, coupled with an existing
interest in that out of which the expectancy
arises.
Section 15. A carrier or depository of any kind
has an insurable interest in a thing held by him
as such, to the extent of his liability but not to
exceed the value thereof.
Section 16. A mere contingent or expectant
interest in any thing, not founded on an actual
right to the thing, nor upon any valid contract
for it, is not insurable.
Section 17. The measure of an insurable
interest in property is the extent to which the
insured might be damnified by loss or injury
thereof.
Section 18. No contract or policy of insurance
on property shall be enforceable except for the
benefit of some person having an insurable
interest in the property insured.
Section 19. An interest in property insured
must exist when the insurance takes effect,
and when the loss occurs, but need not exist in
the meantime; and interest in the life or health
of a person insured must exist when the
insurance takes effect, but need not exist
thereafter or when the loss occurs.
Section 20. Except in the cases specified in the
next four sections, and in the cases of life,
accident, and health insurance, a change of
interest in any part of a thing insured
unaccompanied by a corresponding change of
interest in the insurance, suspends the
insurance to an equivalent extent, until the
interest in the thing and the interest in the
insurance are vested in the same person.
Section 21. A change of interest in a thing
insured, after the occurrence of an injury which
results in a loss, does not affect the right of the
insured to indemnity for the loss.
Section 22. A change of interest in one or more
of several distinct things, separately insured by
one policy, does not avoid the insurance as to
the others.
Section 23. A change of interest, by will or
succession, on the death of the insured, does
not avoid an insurance; and his interest in the
insurance passes to the person taking his
interest in the thing insured.
Section 24. A transfer of interest by one of
several partners, joint owners, or owners in
common, who are jointly insured, to the others,
does not avoid an insurance even though it has
been agreed that the insurance shall cease
upon an alienation of the thing insured.
Section 25. Every stipulation in a policy of
insurance for the payment of loss whether the
person insured has or has not any interest in
the property insured, or that the policy shall be
received as proof of such interest, and every
policy executed by way of gaming or wagering,
is void.
TITLE 4
CONCEALMENT
Section 26. A neglect to communicate that
which a party knows and ought to
communicate, is called a concealment.
Section 27. A concealment whether intentional
or unintentional entitles the injured party to
rescind a contract of insurance.
Section 28. Each party to a contract of
insurance must communicate to the other, in
good faith, all facts within his knowledge which
are material to the contract and as to which he
makes no warranty, and which the other has
not the means of ascertaining.
Section 29. An intentional and fraudulent
omission, on the part of one insured, to
communicate information of matters proving or
tending to prove the falsity of a warranty,
entitles the insurer to rescind.
Section 30. Neither party to a contract of
insurance is bound to communicate
information of the matters following, except in
answer to the inquiries of the other:
(a) Those which the other knows;
(b) Those which, in the exercise of ordinary
care, the other ought to know, and of which the
former has no reason to suppose him ignorant;
(c) Those of which the other waives
communication;
(d) Those which prove or tend to prove the
existence of a risk excluded by a warranty, and
which are not otherwise material; and
(e) Those which relate to a risk excepted from
the policy and which are not otherwise
material.
Section 31. Materiality is to be determined not
by the event, but solely by the probable and
reasonable influence of the facts upon the
party to whom the communication is due, in
forming his estimate of the disadvantages of
the proposed contract, or in making his
inquiries.
Section 32. Each party to a contract of
insurance is bound to know all the general
causes which are open to his inquiry, equally
with that of the other, and which may affect the
political or material perils contemplated; and all
general usages of trade.
Section 33. The right to information of material
facts may be waived, either by the terms of
insurance or by neglect to make inquiry as to
such facts, where they are distinctly implied in
other facts of which information is
communicated.
Section 34. Information of the nature or amount
of the interest of one insured need not be
communicated unless in answer to an inquiry,
except as prescribed by Section 51.
Section 35. Neither party to a contract of
insurance is bound to communicate, even
upon inquiry, information of his own judgment
upon the matters in question.
TITLE 5
REPRESENTATION
Section 36. A representation may be oral or
written.
Section 37. A representation may be made at
the time of, or before, issuance of the policy.
Section 38. The language of a representation
is to be interpreted by the same rules as the
language of contracts in general.
Section 39. A representation as to the future is
to be deemed a promise, unless it appears that
it was merely a statement of belief or
expectation.
Section 40. A representation cannot qualify an
express provision in a contract of insurance,
but it may qualify an implied warranty.
Section 41. A representation may be altered or
withdrawn before the insurance is effected, but
not afterwards.
Section 42. A representation must be
presumed to refer to the date on which the
contract goes into effect.
Section 43. When a person insured has no
personal knowledge of a fact, he may
nevertheless repeat information which he has
upon the subject, and which he believes to be
true, with the explanation that he does so on
the information of others; or he may submit the
information, in its whole extent, to the insurer;
and in neither case is he responsible for its
truth, unless it proceeds from an agent of the
insured, whose duty it is to give the information.
Section 44. A representation is to be deemed
false when the facts fail to correspond with its
assertions or stipulations.
Section 45. If a representation is false in a
material point, whether affirmative or
promissory, the injured party is entitled to
rescind the contract from the time when the
representation becomes false.
Section 46. The materiality of a representation
is determined by the same rules as the
materiality of a concealment.
Section 47. The provisions of this chapter
apply as well to a modification of a contract of
insurance as to its original formation.
Section 48. Whenever a right to rescind a
contract of insurance is given to the insurer by
any provision of this chapter, such right must
be exercised previous to the commencement
of an action on the contract.
After a policy of life insurance made payable on
the death of the insured shall have been in
force during the lifetime of the insured for a
period of two (2) years from the date of its issue
or of its last reinstatement, the insurer cannot
prove that the policy is void ab initio or is
rescindable by reason of the fraudulent
concealment or misrepresentation of the
insured or his agent.
TITLE 6
THE POLICY
Section 49. The written instrument in which a
contract of insurance is set forth, is called a
policy of insurance.
Section 50. The policy shall be in printed form
which may contain blank spaces; and any
word, phrase, clause, mark, sign, symbol,
signature, number, or word necessary to
complete the contract of insurance shall be
written on the blank spaces provided therein.
Any rider, clause, warranty or endorsement
purporting to be part of the contract of
insurance and which is pasted or attached to
said policy is not binding on the insured, unless
the descriptive title or name of the rider, clause,
warranty or endorsement is also mentioned
and written on the blank spaces provided in the
policy.
Unless applied for by the insured or owner, any
rider, clause, warranty or endorsement issued
after the original policy shall be countersigned
by the insured or owner, which
countersignature shall be taken as his
agreement to the contents of such rider,
clause, warranty or endorsement.
Notwithstanding the foregoing, the policy may
be in electronic form subject to the pertinent
provisions of Republic Act No. 8792, otherwise
known as the ‘Electronic Commerce Act’ and
to such rules and regulations as may be
prescribed by the Commissioner.
Section 51. A policy of insurance must specify:
(a) The parties between whom the contract is
made;
(b) The amount to be insured except in the
cases of open or running policies;
(c) The premium, or if the insurance is of a
character where the exact premium is only
determinable upon the termination of the
contract, a statement of the basis and rates
upon which the final premium is to be
determined;
(d) The property or life insured;
(e) The interest of the insured in property
insured, if he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to
continue.
Section 52. Cover notes may be issued to bind
insurance temporarily pending the issuance of
the policy. Within sixty (60) days after issue of
a cover note, a policy shall be issued in lieu
thereof, including within its terms the identical
insurance bound under the cover note and the
premium therefor.
Cover notes may be extended or renewed
beyond such sixty (60) days with the written
approval of the Commissioner if he determines
that such extension is not contrary to and is not
for the purpose of violating any provisions of
this Code. The Commissioner may promulgate
rules and regulations governing such
extensions for the purpose of preventing such
violations and may by such rules and
regulations dispense with the requirement of
written approval by him in the case of extension
in compliance with such rules and regulations.
Section 53. The insurance proceeds shall be
applied exclusively to the proper interest of the
person in whose name or for whose benefit it
is made unless otherwise specified in the
policy.
Section 54. When an insurance contract is
executed with an agent or trustee as the
insured, the fact that his principal or beneficiary
is the real party in interest may be indicated by
describing the insured as agent or trustee, or
by other general words in the policy.
Section 55. To render an insurance effected by
one partner or part-owner, applicable to the
interest of his co-partners or other part-owners,
it is necessary that the terms of the policy
should be such as are applicable to the joint or
common interest.
Section 56. When the description of the
insured in a policy is so general that it may
comprehend any person or any class of
persons, only he who can show that it was
intended to include him, can claim the benefit
of the policy.
Section 57. A policy may be so framed that it
will inure to the benefit of whomsoever, during
the continuance of the risk, may become the
owner of the interest insured.
Section 58. The mere transfer of a thing
insured does not transfer the policy, but
suspends it until the same person becomes the
owner of both the policy and the thing insured.
Section 59. A policy is either open, valued or
running.
Section 60. An open policy is one in which the
value of the thing insured is not agreed upon,
and the amount of the insurance merely
represents the insurer’s maximum liability. The
value of such thing insured shall be
ascertained at the time of the loss.
Section 61. A valued policy is one which
expresses on its face an agreement that the
thing insured shall be valued at a specific sum.
Section 62. A running policy is one which
contemplates successive insurances, and
which provides that the object of the policy may
be from time to time defined, especially as to
the subjects of insurance, by additional
statements or indorsements.1âwphi1
Section 63. A condition, stipulation, or
agreement in any policy of insurance, limiting
the time for commencing an action thereunder
to a period of less than one (1) year from the
time when the cause of action accrues, is void.
Section 64. No policy of insurance other than
life shall be cancelled by the insurer except
upon prior notice thereof to the insured, and no
notice of cancellation shall be effective unless
it is based on the occurrence, after the effective
date of the policy, of one or more of the
following:
(a) Nonpayment of premium;
(b) Conviction of a crime arising out of acts
increasing the hazard insured against;
(c) Discovery of fraud or material
misrepresentation;
(d) Discovery of willful or reckless acts or
omissions increasing the hazard insured
against;
(e) Physical changes in the property insured
which result in the property becoming
uninsurable;
(f) Discovery of other insurance coverage that
makes the total insurance in excess of the
value of the property insured; or
(g) A determination by the Commissioner that
the continuation of the policy would violate or
would place the insurer in violation of this
Code.
Section 65. All notices of cancellation
mentioned in the preceding section shall be in
writing, mailed or delivered to the named
insured at the address shown in the policy, or
to his broker provided the broker is authorized
in writing by the policy owner to receive the
notice of cancellation on his behalf, and shall
state:
(a) Which of the grounds set forth in Section 64
is relied upon; and
(b) That, upon written request of the named
insured, the insurer will furnish the facts on
which the cancellation is based.
Section 66. In case of insurance other than life,
unless the insurer at least forty-five (45) days
in advance of the end of the policy period mails
or delivers to the named insured at the address
shown in the policy notice of its intention not to
renew the policy or to condition its renewal
upon reduction of limits or elimination of
coverages, the named insured shall be entitled
to renew the policy upon payment of the
premium due on the effective date of the
renewal. Any policy written for a term of less
than one (1) year shall be considered as if
written for a term of one (1) year. Any policy
written for a term longer than one (1) year or
any policy with no fixed expiration date shall be
considered as if written for successive policy
periods or terms of one (1) year.
TITLE 7
WARRANTIES
Section 67. A warranty is either expressed or
implied.
Section 68. A warranty may relate to the past,
the present, the future, or to any or all of these.
Section 69. No particular form of words is
necessary to create a warranty.
Section 70. Without prejudice to Section 51,
every express warranty, made at or before the
execution of a policy, must be contained in the
policy itself, or in another instrument signed by
the insured and referred to in the policy as
making a part of it.
Section 71. A statement in a policy, of a matter
relating to the person or thing insured, or to the
risk, as fact, is an express warranty thereof.
Section 72. A statement in a policy, which
imparts that it is intended to do or not to do a
thing which materially affects the risk, is a
warranty that such act or omission shall take
place.
Section 73. When, before the time arrives for
the performance of a warranty relating to the
future, a loss insured against happens, or
performance becomes unlawful at the place of
the contract, or impossible, the omission to
fulfill the warranty does not avoid the policy.
Section 74. The violation of a material
warranty, or other material provision of a
policy, on the part of either party thereto,
entitles the other to rescind.
Section 75. A policy may declare that a
violation of specified provisions thereof shall
avoid it, otherwise the breach of an immaterial
provision does not avoid the policy.
Section 76. A breach of warranty without fraud
merely exonerates an insurer from the time
that it occurs, or where it is broken in its
inception, prevents the policy from attaching to
the risk.
TITLE 8
PREMIUM
Section 77. An insurer is entitled to payment of
the premium as soon as the thing insured is
exposed to the peril insured against.
Notwithstanding any agreement to the
contrary, no policy or contract of insurance
issued by an insurance company is valid and
binding unless and until the premium thereof
has been paid, except in the case of a life or an
industrial life policy whenever the grace period
provision applies, or whenever under the
broker and agency agreements with duly
licensed intermediaries, a ninety (90)-day
credit extension is given. No credit extension to
a duly licensed intermediary should exceed
ninety (90) days from date of issuance of the
policy.
Section 78. Employees of the Republic of the
Philippines, including its political subdivisions
and instrumentalities, and government-owned
or -controlled corporations, may pay their
insurance premiums and loan obligations
through salary deduction: Provided, That the
treasurer, cashier, paymaster or official of the
entity employing the government employee is
authorized, notwithstanding the provisions of
any existing law, rules and regulations to the
contrary, to make deductions from the salary,
wage or income of the latter pursuant to the
agreement between the insurer and the
government employee and to remit such
deductions to the insurer concerned, and
collect such reasonable fee for its services.
Section 79. An acknowledgment in a policy or
contract of insurance or the receipt of premium
is conclusive evidence of its payment, so far as
to make the policy binding, notwithstanding
any stipulation therein that it shall not be
binding until the premium is actually paid.
Section 80. A person insured is entitled to a
return of premium, as follows:
(a) To the whole premium if no part of his
interest in the thing insured be exposed to any
of the perils insured against;
(b) Where the insurance is made for a definite
period of time and the insured surrenders his
policy, to such portion of the premium as
corresponds with the unexpired time, at a pro
rata rate, unless a short period rate has been
agreed upon and appears on the face of the
policy, after deducting from the whole premium
any claim for loss or damage under the policy
which has previously accrued: Provided, That
no holder of a life insurance policy may avail
himself of the privileges of this paragraph
without sufficient cause as otherwise provided
by law.
Section 81. If a peril insured against has
existed, and the insurer has been liable for any
period, however short, the insured is not
entitled to return of premiums, so far as that
particular risk is concerned.
Section 82. A person insured is entitled to a
return of the premium when the contract is
voidable, and subsequently annulled under the
provisions of the Civil Code; or on account of
the fraud or misrepresentation of the insurer, or
of his agent, or on account of facts, or the
existence of which the insured was ignorant of
without his fault; or when by any default of the
insured other than actual fraud, the insurer
never incurred any liability under the policy.
A person insured is not entitled to a return of
premium if the policy is annulled, rescinded or
if a claim is denied by reason of fraud.
Section 83. In case of an over insurance by
several insurers other than life, the insured is
entitled to a ratable return of the premium,
proportioned to the amount by which the
aggregate sum insured in all the policies
exceeds the insurable value of the thing at risk.
Section 84. An insurer may contract and
accept payments, in addition to regular
premium, for the purpose of paying future
premiums on the policy or to increase the
benefits thereof.
TITLE 9
LOSS
Section 85. An agreement not to transfer the
claim of the insured against the insurer after
the loss has happened, is void if made before
the loss except as otherwise provided in the
case of life insurance.
Section 86. Unless otherwise provided by the
policy, an insurer is liable for a loss of which a
peril insured against was the proximate cause,
although a peril not contemplated by the
contract may have been a remote cause of the
loss; but he is not liable for a loss of which the
peril insured against was only a remote cause.
Section 87. An insurer is liable where the thing
insured is rescued from a peril insured against
that would otherwise have caused a loss, if, in
the course of such rescue, the thing is exposed
to a peril not insured against, which
permanently deprives the insured of its
possession, in whole or in part; or where a loss
is caused by efforts to rescue the thing insured
from a peril insured against.
Section 88. Where a peril is especially
excepted in a contract of insurance, a loss,
which would not have occurred but for such
peril, is thereby excepted although the
immediate cause of the loss was a peril which
was not excepted.
Section 89. An insurer is not liable for a loss
caused by the willful act or through the
connivance of the insured; but he is not
exonerated by the negligence of the insured, or
of the insurance agents or others.
TITLE 10
NOTICE OF LOSS
Section 90. In case of loss upon an insurance
against fire, an insurer is exonerated, if written
notice thereof be not given to him by an
insured, or some person entitled to the benefit
of the insurance, without unnecessary delay.
For other non-life insurance, the Commissioner
may specify the period for the submission of
the notice of loss.
Section 91. When a preliminary proof of loss is
required by a policy, the insured is not bound
to give such proof as would be necessary in a
court of justice; but it is sufficient for him to give
the best evidence which he has in his power at
the time.
Section 92. All defects in a notice of loss, or in
preliminary proof thereof, which the insured
might remedy, and which the insurer omits to
specify to him, without unnecessary delay, as
grounds of objection, are waived.
Section 93. Delay in the presentation to an
insurer of notice or proof of loss is waived if
caused by any act of him, or if he omits to take
objection promptly and specifically upon that
ground.
Section 94. If the policy requires, by way of
preliminary proof of loss, the certificate or
testimony of a person other than the insured, it
is sufficient for the insured to use reasonable
diligence to procure it, and in case of the
refusal of such person to give it, then to furnish
reasonable evidence to the insurer that such
refusal was not induced by any just grounds of
disbelief in the facts necessary to be certified
or testified.
TITLE 11
DOUBLE INSURANCE
Section 95. A double insurance exists where
the same person is insured by several insurers
separately in respect to the same subject and
interest.
Section 96. Where the insured in a policy other
than life is over insured by double insurance:
(a) The insured, unless the policy otherwise
provides, may claim payment from the insurers
in such order as he may select, up to the
amount for which the insurers are severally
liable under their respective contracts;
(b) Where the policy under which the insured
claims is a valued policy, any sum received by
him under any other policy shall be deducted
from the value of the policy without regard to
the actual value of the subject matter insured;
(c) Where the policy under which the insured
claims is an unvalued policy, any sum received
by him under any policy shall be deducted
against the full insurable value, for any sum
received by him under any policy;
(d) Where the insured receives any sum in
excess of the valuation in the case of valued
policies, or of the insurable value in the case of
unvalued policies, he must hold such sum in
trust for the insurers, according to their right of
contribution among themselves;
(e) Each insurer is bound, as between himself
and the other insurers, to contribute ratably to
the loss in proportion to the amount for which
he is liable under his contract.
TITLE 12
REINSURANCE
Section 97. A contract of reinsurance is one by
which an insurer procures a third person to
insure him against loss or liability by reason of
such original insurance.
Section 98. Where an insurer obtains
reinsurance, except under automatic
reinsurance treaties, he must communicate all
the representations of the original insured, and
also all the knowledge and information he
possesses, whether previously or
subsequently acquired, which are material to
the risk.
Section 99. A reinsurance is presumed to be a
contract of indemnity against liability, and not
merely against damage.
Section 100. The original insured has no
interest in a contract of reinsurance.
CHAPTER II
CLASSES OF INSURANCE
TITLE I
MARINE INSURANCE
SUB-TITLE 1-A
DEFINITION
Section 101. Marine Insurance includes:
(a) Insurance against loss of or damage to:
(1) Vessels, craft, aircraft, vehicles, goods,
freights, cargoes, merchandise, effects,
disbursements, profits, moneys, securities,
choses in action, instruments of debts,
valuable papers, bottomry, and respondentia
interests and all other kinds of property and
interests therein, in respect to, appertaining to
or in connection with any and all risks or perils
of navigation, transit or transportation, or while
being assembled, packed, crated, baled,
compressed or similarly prepared for shipment
or while awaiting shipment, or during any
delays, storage, transhipment, or reshipment
incident thereto, including war risks, marine
builder’s risks, and all personal property floater
risks;
(2) Person or property in connection with or
appertaining to a marine, inland marine, transit
or transportation insurance, including liability
for loss of or damage arising out of or in
connection with the construction, repair,
operation, maintenance or use of the subject
matter of such insurance (but not including life
insurance or surety bonds nor insurance
against loss by reason of bodily injury to any
person arising out of ownership, maintenance,
or use of automobiles);
(3) Precious stones, jewels, jewelry, precious
metals, whether in course of transportation or
otherwise; and
(4) Bridges, tunnels and other instrumentalities
of transportation and communication
(excluding buildings, their furniture and
furnishings, fixed contents and supplies held in
storage); piers, wharves, docks and slips, and
other aids to navigation and transportation,
including dry docks and marine railways, dams
and appurtenant facilities for the control of
waterways.
(b) Marine protection and indemnity insurance,
meaning insurance against, or against legal
liability of the insured for loss, damage, or
expense incident to ownership, operation,
chartering, maintenance, use, repair, or
construction of any vessel, craft or
instrumentality in use of ocean or inland
waterways, including liability of the insured for
personal injury, illness or death or for loss of or
damage to the property of another person.
SUB-TITLE 1-B
INSURABLE INTEREST
Section 102. The owner of a ship has in all
cases an insurable interest in it, even when it
has been chartered by one who covenants to
pay him its value in case of loss: Provided,
That in this case the insurer shall be liable for
only that part of the loss which the insured
cannot recover from the charterer.
Section 103. The insurable interest of the
owner of the ship hypothecated by bottomry is
only the excess of its value over the amount
secured by bottomry.
Section 104. Freightage, in the sense of a
policy of marine insurance, signifies all the
benefits derived by the owner, either from the
chartering of the ship or its employment for the
carriage of his own goods or those of others.
Section 105. The owner of a ship has an
insurable interest in expected freightage which
according to the ordinary and probable course
of things he would have earned but for the
intervention of a peril insured against or other
peril incident to the voyage.
Section 106. The interest mentioned in the last
section exists, in case of a charter party, when
the ship has broken ground on the chartered
voyage. If a price is to be paid for the carriage
of goods it exists when they are actually on
board, or there is some contract for putting
them on board, and both ship and goods are
ready for the specified voyage.
Section 107. One who has an interest in the
thing from which profits are expected to
proceed has an insurable interest in the profits.
Section 108. The charterer of a ship has an
insurable interest in it, to the extent that he is
liable to be damnified by its loss.
SUB-TITLE 1-C
CONCEALMENT
Section 109. In marine insurance, each party is
bound to communicate, in addition to what is
required by Section 28, all the information
which he possesses, material to the risk,
except such as is mentioned in Section 30, and
to state the exact and whole truth in relation to
all matters that he represents, or upon inquiry
discloses or assumes to disclose.
Section 110. In marine insurance, information
of the belief or expectation of a third person, in
reference to a material fact, is material.
Section 111. A person insured by a contract of
marine insurance is presumed to have
knowledge, at the time of insuring, of a prior
loss, if the information might possibly have
reached him in the usual mode of transmission
and at the usual rate of communication.
Section 112. A concealment in a marine
insurance, in respect to any of the following
matters, does not vitiate the entire contract, but
merely exonerates the insurer from a loss
resulting from the risk concealed:
(a) The national character of the insured;
(b) The liability of the thing insured to capture
and detention;
(c) The liability to seizure from breach of
foreign laws of trade;
(d) The want of necessary documents; and
(e) The use of false and simulated papers.
 SUB-TITLE 1-D
REPRESENTATION
Section 113. If a representation by a person
insured by a contract of marine insurance, is
intentionally false in any material respect, or in
respect of any fact on which the character and
nature of the risk depends, the insurer may
rescind the entire contract.
Section 114. The eventual falsity of a
representation as to expectation does not, in
the absence of fraud, avoid a contract of
marine insurance.
SUB-TITLE 1-E
IMPLIED WARRANTIES
Section 115. In every marine insurance upon a
ship or freight, or freightage, or upon any thing
which is the subject of marine insurance, a
warranty is implied that the ship is seaworthy.
Section 116. A ship is seaworthy when
reasonably fit to perform the service and to
encounter the ordinary perils of the voyage
contemplated by the parties to the policy.
Section 117. An implied warranty of
seaworthiness is complied with if the ship be
seaworthy at the time of the commencement of
the risk, except in the following cases:
(a) When the insurance is made for a specified
length of time, the implied warranty is not
complied with unless the ship be seaworthy at
the commencement of every voyage it
undertakes during that time;
(b) When the insurance is upon the cargo
which, by the terms of the policy, description of
the voyage, or established custom of the trade,
is to be transhipped at an intermediate port, the
implied warranty is not complied with unless
each vessel upon which the cargo is shipped,
or transhipped, be seaworthy at the
commencement of each particular voyage.
Section 118. A warranty of seaworthiness
extends not only to the condition of the
structure of the ship itself, but requires that it
be properly laden, and provided with a
competent master, a sufficient number of
competent officers and seamen, and the
requisite appurtenances and equipment, such
as ballasts, cables and anchors, cordage and
sails, food, water, fuel and lights, and other
necessary or proper stores and implements for
the voyage.
Section 119. Where different portions of the
voyage contemplated by a policy differ in
respect to the things requisite to make the ship
seaworthy therefor, a warranty of
seaworthiness is complied with if, at the
commencement of each portion, the ship is
seaworthy with reference to that portion.
Section 120. When the ship becomes
unseaworthy during the voyage to which an
insurance relates, an unreasonable delay in
repairing the defect exonerates the insurer on
ship or shipowner’s interest from liability from
any loss arising therefrom.
Section 121. A ship which is seaworthy for the
purpose of an insurance upon the ship may,
nevertheless, by reason of being unfitted to
receive the cargo, be unseaworthy for the
purpose of insurance upon the cargo.
Section 122. Where the nationality or neutrality
of a ship or cargo is expressly warranted, it is
implied that the ship will carry the requisite
documents to show such nationality or
neutrality and that it will not carry any
documents which cast reasonable suspicion
thereon.
SUB-TITLE 1-F
THE VOYAGE AND DEVIATION
Section 123. When the voyage contemplated
by a marine insurance policy is described by
the places of beginning and ending, the voyage
insured is one which conforms to the course of
sailing fixed by mercantile usage between
those places.
Section 124. If the course of sailing is not fixed
by mercantile usage, the voyage insured by a
marine insurance policy is that way between
the places specified, which to a master of
ordinary skill and discretion, would mean the
most natural, direct and advantageous.
Section 125. Deviation is a departure from the
course of the voyage insured, mentioned in the
last two (2) sections, or an unreasonable delay
in pursuing the voyage or the commencement
of an entirely different voyage.
Section 126. A deviation is proper:
(a) When caused by circumstances over which
neither the master nor the owner of the ship
has any control;
(b) When necessary to comply with a warranty,
or to avoid a peril, whether or not the peril is
insured against;
(c) When made in good faith, and upon
reasonable grounds of belief in its necessity to
avoid a peril; or
(d) When made in good faith, for the purpose
of saving human life or relieving another vessel
in distress.
Section 127. Every deviation not specified in
the last section is improper.
Section 128. An insurer is not liable for any loss
happening to the thing insured subsequent to
an improper deviation.
SUB-TITLE 1-G
LOSS
Section 129. A loss may be either total or
partial.
Section 130. Every loss which is not total is
partial.
Section 131. A total loss may be either actual
or constructive.
Section 132. An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking,
or by being broken up;
(c) Any damage to the thing which renders it
valueless to the owner for the purpose for
which he held it; or
(d) Any other event which effectively deprives
the owner of the possession, at the port of
destination, of the thing insured.
Section 133. A constructive total loss is one
which gives to a person insured a right to
abandon, under Section 141.
Section 134. An actual loss may be presumed
from the continued absence of a ship without
being heard of. The length of time which is
sufficient to raise this presumption depends on
the circumstances of the case.
Section 135. When a ship is prevented, at an
intermediate port, from completing the voyage,
by the perils insured against, the liability of a
marine insurer on the cargo continues after
they are thus reshipped.
Nothing in this section shall prevent an insurer
from requiring an additional premium if the
hazard be increased by this extension of
liability.
Section 136. In addition to the liability
mentioned in the last section, a marine insurer
is bound for damages, expenses of
discharging, storage, reshipment, extra
freightage, and all other expenses incurred in
saving cargo reshipped pursuant to the last
section, up to the amount insured.
Nothing in this or in the preceding section shall
render a marine insurer liable for any amount
in excess of the insured value or, if there be
none, of the insurable value.
Section 137. Upon an actual total loss, a
person insured is entitled to payment without
notice of abandonment.
Section 138. Where it has been agreed that an
insurance upon a particular thing, or class of
things, shall be free from particular average, a
marine insurer is not liable for any particular
average loss not depriving the insured of the
possession, at the port of destination, of the
whole of such thing, or class of things, even
though it becomes entirely worthless; but such
insurer is liable for his proportion of all general
average loss assessed upon the thing insured.
Section 139. An insurance confined in terms to
an actual loss does not cover a constructive
total loss, but covers any loss, which
necessarily results in depriving the insured of
the possession, at the port of destination, of the
entire thing insured.
SUB-TITLE 1-H
ABANDONMENT
Section 140. Abandonment, in marine
insurance, is the act of the insured by which,
after a constructive total loss, he declares the
relinquishment to the insurer of his interest in
the thing insured.
Section 141. A person insured by a contract of
marine insurance may abandon the thing
insured, or any particular portion thereof
separately valued by the policy, or otherwise
separately insured, and recover for a total loss
thereof, when the cause of the loss is a peril
insured against:
(a) If more than three-fourths (¾) thereof in
value is actually lost, or would have to be
expended to recover it from the peril;
(b) If it is injured to such an extent as to reduce
its value more than three-fourths (¾);
(c) If the thing insured is a ship, and the
contemplated voyage cannot be lawfully
performed without incurring either an expense
to the insured of more than three-fourths (¾)
the value of the thing abandoned or a risk
which a prudent man would not take under the
circumstances; or
(d) If the thing insured, being cargo or
freightage, and the voyage cannot be
performed, nor another ship procured by the
master, within a reasonable time and with
reasonable diligence, to forward the cargo,
without incurring the like expense or risk
mentioned in the preceding subparagraph. But
freightage cannot in any case be abandoned
unless the ship is also abandoned.
Section 142. An abandonment must be neither
partial nor conditional.
Section 143. An abandonment must be made
within a reasonable time after receipt of reliable
information of the loss, but where the
information is of a doubtful character, the
insured is entitled to a reasonable time to make
inquiry.
Section 144. Where the information upon
which an abandonment has been made proves
incorrect, or the thing insured was so far
restored when the abandonment was made
that there was then in fact no total loss, the
abandonment becomes ineffectual.
Section 145. Abandonment is made by giving
notice thereof to the insurer, which may be
done orally, or in writing: Provided, That if the
notice be done orally, a written notice of such
abandonment shall be submitted within seven
(7) days from such oral notice.
Section 146. A notice of abandonment must be
explicit, and must specify the particular cause
of the abandonment, but need state only
enough to show that there is probable cause
therefor, and need not be accompanied with
proof of interest or of loss.
Section 147. An abandonment can be
sustained only upon the cause specified in the
notice thereof.
Section 148. An abandonment is equivalent to
a transfer by the insured of his interest to the
insurer, with all the chances of recovery and
indemnity.
Section 149. If a marine insurer pays for a loss
as if it were an actual total loss, he is entitled to
whatever may remain of the thing insured, or
its proceeds or salvage, as if there had been a
formal abandonment.
Section 150. Upon an abandonment, acts done
in good faith by those who were agents of the
insured in respect to the thing insured,
subsequent to the loss, are at the risk of the
insurer, and for his benefit.
Section 151. Where notice of abandonment is
properly given, the rights of the insured are not
prejudiced by the fact that the insurer refuses
to accept the abandonment.
Section 152. The acceptance of an
abandonment may be either express or implied
from the conduct of the insurer. The mere
silence of the insurer for an unreasonable
length of time after notice shall be construed as
an acceptance.
Section 153. The acceptance of an
abandonment, whether express or implied, is
conclusive upon the parties, and admits the
loss and the sufficiency of the abandonment.
Section 154. An abandonment once made and
accepted is irrevocable, unless the ground
upon which it was made proves to be
unfounded.
Section 155. On an accepted abandonment of
a ship, freightage earned previous to the loss
belongs to the insurer of said freightage; but
freightage subsequently earned belongs to the
insurer of the ship.
Section 156. If an insurer refuses to accept a
valid abandonment, he is liable as upon an
actual total loss, deducting from the amount
any proceeds of the thing insured which may
have come to the hands of the insured.
Section 157. If a person insured omits to
abandon, he may nevertheless recover his
actual loss.
SUB-TITLE 1-I
MEASURE OF INDEMNITY
Section 158. A valuation in a policy of marine
insurance is conclusive between the parties
thereto in the adjustment of either a partial or
total loss, if the insured has some interest at
risk, and there is no fraud on his part; except
that when a thing has been hypothecated by
bottomry or respondentia, before its insurance,
and without the knowledge of the person
actually procuring the insurance, he may show
the real value. But a valuation fraudulent in
fact, entitles the insurer to rescind the contract.
Section 159. A marine insurer is liable upon a
partial loss, only for such proportion of the
amount insured by him as the loss bears to the
value of the whole interest of the insured in the
property insured.
Section 160. Where profits are separately
insured in a contract of marine insurance, the
insured is entitled to recover, in case of loss, a
proportion of such profits equivalent to the
proportion which the value of the property lost
bears to the value of the whole.
Section 161. In case of a valued policy of
marine insurance on freightage or cargo, if a
part only of the subject is exposed to risk, the
valuation applies only in proportion to such
part.
Section 162. When profits are valued and
insured by a contract of marine insurance, a
loss of them is conclusively presumed from a
loss of the property out of which they are
expected to arise, and the valuation fixes their
amount.
Section 163. In estimating a loss under an
open policy of marine insurance the following
rules are to be observed:
(a) The value of a ship is its value at the
beginning of the risk, including all articles or
charges which add to its permanent value or
which are necessary to prepare it for the
voyage insured;
(b) The value of the cargo is its actual cost to
the insured, when laden on board, or where the
cost cannot be ascertained, its market value at
the time and place of lading, adding the
charges incurred in purchasing and placing it
on board, but without reference to any loss
incurred in raising money for its purchase, or to
any drawback on its exportation, or to the
fluctuation of the market at the port of
destination, or to expenses incurred on the way
or on arrival;
(c) The value of freightage is the gross
freightage, exclusive of primage, without
reference to the cost of earning it; and
(d) The cost of insurance is in each case to be
added to the value thus estimated.
Section 164. If cargo insured against partial
loss arrives at the port of destination in a
damaged condition, the loss of the insured is
deemed to be the same proportion of the value
which the market price at that port, of the thing
so damaged, bears to the market price it would
have brought if sound.
Section 165. A marine insurer is liable for all
the expenses attendant upon a loss which
forces the ship into port to be repaired; and
where it is stipulated in the policy that the
insured shall labor for the recovery of the
property, the insurer is liable for the expense
incurred thereby, such expense, in either case,
being in addition to a total loss, if that
afterwards occurs.
Section 166. A marine insurer is liable for a loss
falling upon the insured, through a contribution
in respect to the thing insured, required to be
made by him towards a general average loss
called for by a peril insured against: Provided,
That the liability of the insurer shall be limited
to the proportion of contribution attaching to his
policy value where this is less than the
contributing value of the thing insured.
Section 167. When a person insured by a
contract of marine insurance has a demand
against others for contribution, he may claim
the whole loss from the insurer, subrogating
him to his own right to contribution. But no such
claim can be made upon the insurer after the
separation of the interests liable to
contribution, nor when the insured, having the
right and opportunity to enforce contribution
from others, has neglected or waived the
exercise of that right.
Section 168. In the case of a partial loss of ship
or its equipment, the old materials are to be
applied towards payment for the new. Unless
otherwise stipulated in the policy, a marine
insurer is liable for only two-thirds (2/3) of the
remaining cost of repairs after such deduction,
except that anchors must be paid in full.
TITLE 2
FIRE INSURANCE
Section 169. As used in this Code, the term fire
insurance shall include insurance against loss
by fire, lightning, windstorm, tornado or
earthquake and other allied risks, when such
risks are covered by extension to fire insurance
policies or under separate policies.
Section 170. An alteration in the use or
condition of a thing insured from that to which
it is limited by the policy made without the
consent of the insurer, by means within the
control of the insured, and increasing the risks,
entitles an insurer to rescind a contract of fire
insurance.
Section 171. An alteration in the use or
condition of a thing insured from that to which
it is limited by the policy, which does not
increase the risk, does not affect a contract of
fire insurance.
Section 172. A contract of fire insurance is not
affected by any act of the insured subsequent
to the execution of the policy, which does not
violate its provisions, even though it increases
the risk and is the cause of the loss.
Section 173. If there is no valuation in the
policy, the measure of indemnity in an
insurance against fire is the expense it would
be to the insured at the time of the
commencement of the fire to replace the thing
lost or injured in the condition in which it was at
the time of the injury; but if there is a valuation
in a policy of fire insurance, the effect shall be
the same as in a policy of marine insurance.
Section 174. Whenever the insured desires to
have a valuation named in his policy, insuring
any building or structure against fire, he may
require such building or structure to be
examined by an independent appraiser and the
value of the insured’s interest therein may then
be fixed as between the insurer and the
insured. The cost of such examination shall be
paid for by the insured. A clause shall be
inserted in such policy stating substantially that
the value of the insured’s interest in such
building or structure has been thus fixed. In the
absence of any change increasing the risk
without the consent of the insurer or of fraud on
the part of the insured, then in case of a total
loss under such policy, the whole amount so
insured upon the insured’s interest in such
building or structure, as stated in the policy
upon which the insurers have received a
premium, shall be paid, and in case of a partial
loss the full amount of the partial loss shall be
so paid, and in case there are two (2) or more
policies covering the insured’s interest therein,
each policy shall contribute pro rata to the
payment of such whole or partial loss. But in no
case shall the insurer be required to pay more
than the amount thus stated in such policy.
This section shall not prevent the parties from
stipulating in such policies concerning the
repairing, rebuilding or replacing of buildings or
structures wholly or partially damaged or
destroyed.
Section 175. No policy of fire insurance shall
be pledged, hypothecated, or transferred to
any person, firm or company who acts as agent
for or otherwise represents the issuing
company, and any such pledge,
hypothecation, or transfer hereafter made shall
be void and of no effect insofar as it may affect
other creditors of the insured.
TITLE 3
CASUALTY INSURANCE
Section 176. Casualty insurance is insurance
covering loss or liability arising from accident
or mishap, excluding certain types of loss
which by law or custom are considered as
falling exclusively within the scope of other
types of insurance such as fire or marine. It
includes, but is not limited to, employer’s
liability insurance, motor vehicle liability
insurance, plate glass insurance, burglary and
theft insurance, personal accident and health
insurance as written by non-life insurance
companies, and other substantially similar
kinds of insurance.
TITLE 4
SURETYSHIP
Section 177. A contract of suretyship is an
agreement whereby a party called the surety
guarantees the performance by another party
called the principal or obligor of an obligation
or undertaking in favor of a third party called
the obligee. It includes official recognizances,
stipulations, bonds or undertakings issued by
any company by virtue of and under the
provisions of Act No. 536, as amended by Act
No. 2206.
Section 178. The liability of the surety or
sureties shall be joint and several with the
obligor and shall be limited to the amount of the
bond. It is determined strictly by the terms of
the contract of suretyship in relation to the
principal contract between the obligor and the
obligee.
Section 179. The surety is entitled to payment
of the premium as soon as the contract of
suretyship or bond is perfected and delivered
to the obligor. No contract of suretyship or
bonding shall be valid and binding unless and
until the premium therefor has been paid,
except where the obligee has accepted the
bond, in which case the bond becomes valid
and enforceable irrespective of whether or not
the premium has been paid by the obligor to
the surety: Provided, That if the contract of
suretyship or bond is not accepted by, or filed
with the obligee, the surety shall collect only a
reasonable amount, not exceeding fifty percent
(50%) of the premium due thereon as service
fee plus the cost of stamps or other taxes
imposed for the issuance of the contract or
bond: Provided, however, That if the
nonacceptance of the bond be due to the fault
or negligence of the surety, no such service
fee, stamps or taxes shall be collected.
In the case of a continuing bond, the obligor
shall pay the subsequent annual premium as it
falls due until the contract of suretyship is
cancelled by the obligee or by the
Commissioner or by a court of competent
jurisdiction, as the case may be.
Section 180. Pertinent provisions of the Civil
Code of the Philippines shall be applied in a
suppletory character whenever necessary in
interpreting the provisions of a contract of
suretyship.
TITLE 5
LIFE INSURANCE
Section 181. Life insurance is insurance on
human lives and insurance appertaining
thereto or connected therewith.
Every contract or undertaking for the payment
of annuities including contracts for the payment
of lump sums under a retirement program
where a life insurance company manages or
acts as a trustee for such retirement program
shall be considered a life insurance contract for
purposes of this Code.
Section 182. An insurance upon life may be
made payable on the death of the person, or
on his surviving a specified period, or
otherwise contingently on the continuance or
cessation of life.
Every contract or pledge for the payment of
endowments or annuities shall be considered
a life insurance contract for purposes of this
Code.
In the absence of a judicial guardian, the father,
or in the latter’s absence or incapacity, the
mother, of any minor, who is an insured or a
beneficiary under a contract of life, health, or
accident insurance, may exercise, in behalf of
said minor, any right under the policy, without
necessity of court authority or the giving of a
bond, where the interest of the minor in the
particular act involved does not exceed Five
hundred thousand pesos (P500,000.00) or in
such reasonable amount as may be
determined by the Commissioner. Such right
may include, but shall not be limited to,
obtaining a policy loan, surrendering the policy,
receiving the proceeds of the Policy, and giving
the minor’s consent to any transaction on the
policy.
In the absence or in case of the incapacity of
the father or mother, the grandparent, the
eldest brother or sister at least eighteen (18)
years of age, or any relative who has actual
custody of the minor insured or beneficiary,
shall act as a guardian without need of a court
order or judicial appointment as such guardian,
as long as such person is not otherwise
disqualified or incapacitated. Payment made
by the insurer pursuant to this section shall
relieve such insurer of any liability under the
contract.
Section 183. The insurer in a life insurance
contract shall be liable in case of suicide only
when it is committed after the policy has been
in force for a period of two (2) years from the
date of its issue or of its last reinstatement,
unless the policy provides a shorter
period: Provided, however, That suicide
committed in the state of insanity shall be
compensable regardless of the date of
commission.
Section 184. A policy of insurance upon life or
health may pass by transfer, will or succession
to any person, whether he has an insurable
interest or not, and such person may recover
upon it whatever the insured might have
recovered.
Section 185. Notice to an insurer of a transfer
or bequest thereof is not necessary to preserve
the validity of a policy of insurance upon life or
health, unless thereby expressly required.
Section 186. Unless the interest of a person
insured is susceptible of exact pecuniary
measurement, the measure of indemnity under
a policy of insurance upon life or health is the
sum fixed in the policy.
TITLE 6
MICROINSURANCE
Section 187. Microinsurance is a financial
product or service that meets the risk
protection needs of the poor where:
(a) The amount of contributions, premiums,
fees or charges, computed on a daily basis,
does not exceed seven and a half percent
(7.5%) of the current daily minimum wage rate
for nonagricultural workers in Metro Manila;
and
(b) The maximum sum of guaranteed benefits
is not more than one thousand (1,000) times of
the current daily minimum wage rate for
nonagricultural workers in Metro Manila.
Section 188. No insurance company or mutual
benefit association shall engage in the
business of microinsurance unless it
possesses all the requirements as may be
prescribed by the Commissioner. The
Commissioner shall issue such rules and
regulations governing microinsurance.
CHAPTER II-A
FINANCIAL REPORTING FRAMEWORK
Section 189. All companies regulated by the
Commission, unless otherwise required by law,
should comply with the financial reporting
frameworks adopted by the Commission for
purposes of creating the statutory financial
reports and the annual statements to be
submitted to the Commission. Financial
reporting framework means a set of accounting
and reporting principles, standards,
interpretations and pronouncements that must
be adopted in the preparation and submission
of the statutory financial statements and
reports required by the Commission. This
financial reporting framework is not the same
as the financial reporting framework used to
prepare the financial statements that the
Securities and Exchange Commission may
require. The main purpose of the statutory
statements is to present important information
about the level of risk and solvency situation of
insurers. In prescribing the applicable statutory
financial reporting framework, the
Commissioner shall take into account
international standards concerning solvency
and insurance company reporting as well as
generally accepted actuarial principles
concerning financial reporting promulgated by
the Actuarial Society of the Philippines.
The assets and investments discussed in
Sections 204 to 215 shall be accounted for in
accordance with this section.
The valuation of reserves shall be accounted
for in accordance with Title 5 of this Code.
CHAPTER III
THE BUSINESS OF INSURANCE
TITLE 1
INSURANCE COMPANIES,
ORGANIZATION,
CAPITALIZATION AND AUTHORIZATION
Section 190. For purposes of this Code, the
term insurer or insurance company shall
include all partnerships, associations,
cooperatives or corporations, including
government-owned or -controlled corporations
or entities, engaged as principals in the
insurance business, excepting mutual benefit
associations. Unless the context otherwise
requires, the term shall also include
professional reinsurers defined in Section
288. Domestic companyshall include
companies formed, organized or existing under
the laws of the Philippines. Foreign
company when used without limitation shall
include companies formed, organized, or
existing under any laws other than those of the
Philippines.
Section 191. The provisions of the Corporation
Code, as amended, shall apply to all insurance
corporations now or hereafter engaged in
business in the Philippines insofar as they do
not conflict with the provisions of this chapter.
Section 192. No corporation, partnership, or
association of persons shall transact any
insurance business in the Philippines except
as agent of a corporation, partnership or
association authorized to do the business of
insurance in the Philippines, unless possessed
of the capital and assets required of an
insurance corporation doing the same kind of
business in the Philippines and invested in the
same manner; unless the Commissioner shall
have granted it a certificate to the effect that it
has complied with all the provisions of this
Code.
Every entity receiving any such certificate of
authority shall be subject to the insurance and
other applicable laws of the Philippines and to
the jurisdiction and supervision of the
Commissioner.
Section 193. No insurance company shall
transact any insurance business in the
Philippines until after it shall have obtained a
certificate of authority for that purpose from the
Commissioner upon application therefor and
payment by the company concerned of the
fees hereinafter prescribed.
The Commissioner may refuse to issue a
certificate of authority to any insurance
company if, in his judgment, such refusal will
best promote the interest of the people of this
country. No such certificate of authority shall
be granted to any such company until the
Commissioner shall have satisfied himself by
such examination as he may make and such
evidence as he may require that such company
is qualified by the laws of the Philippines to
transact business therein, that the grant of
such authority appears to be justified in the
light of local economic requirements, and that
the direction and administration, as well as the
integrity and responsibility of the organizers
and administrators, the financial organization
and the amount of capital, reasonably assure
the safety of the interests of the policyholders
and the public.
In order to maintain the quality of the
management of the insurance companies and
afford better protection to policyholders and the
public in general, any person of good moral
character, unquestioned integrity and
recognized competence may be elected or
appointed director or officer of insurance
companies in accordance with the pertinent
provisions contained in the corporate
governance circulars prescribed by the
Commissioner. In addition hereto, the
Commissioner shall prescribe the
qualifications of directors, executive officers
and other key officials of insurance companies
for purposes of this section.
No person shall concurrently be a Director
and/or Officer of an insurance company and an
adjustment company.
Before issuing such certificate of authority, the
Commissioner must be satisfied that the name
of the company is not that of any other known
company transacting a similar business in the
Philippines, or a name so similar as to be
calculated to mislead the public. The
Commissioner may issue rules and regulations
on the use of names of insurance companies
and other supervised persons or entities.
The certificate of authority issued by the
Commissioner shall expire on the last day of
December, three (3) years following its date of
issuance, and shall be renewable every three
(3) years thereafter, subject to the company’s
continuing compliance with the provisions of
this Code, circulars, instructions, rulings or
decisions of the Commission.
Every company receiving any such certificates
of authority shall be subject to the provisions of
this Code and other related laws and to the
jurisdiction and supervision of the
Commissioner.
No insurance company may be authorized to
transact in the Philippines the business of life
and non-life insurance concurrently, unless
specifically authorized to do so by the
Commissioner: Provided, That the
terms life and non–lifeinsurance shall be
deemed to include health, accident and
disability insurance.
No insurance company shall have equity in an
adjustment company and neither shall an
adjustment company have equity in an
insurance company.
No insurance company issued with a valid
certificate of authority to transact insurance
business anywhere in the Philippines by the
Insurance Commissioner, shall be barred,
prevented, or disenfranchised from issuing any
insurance policy or from transacting any
insurance business within the scope or
coverage of its certificate of authority,
anywhere in the Philippines, by any local
government unit or authority, for whatever
guise or reason whatsoever, including under
any kind of ordinance, accreditation system, or
scheme. Any local ordinance or local
government unit regulatory issuance imposing
such restriction or disenfranchisement on any
insurance company shall be deemed null and
void ab initio.
Section 194. Except as provided in Section
289, no new domestic life or non-life insurance
company shall, in a stock corporation, engage
in business in the Philippines unless
possessed of a paid-up capital equal to at least
One billion pesos
(P1,000,000,000.00): Provided, That a
domestic insurance company already doing
business in the Philippines shall have a net
worth by June 30, 2013 of Two hundred fifty
million pesos (P250,000,000.00). Furthermore,
said company must have by December 31,
2016, an additional Three hundred million
pesos (P300,000,000.00) in net worth; by
December 31, 2019, an additional Three
hundred fifty million pesos (P350,000,000.00)
in net worth; and by December 31, 2022, an
additional Four hundred million pesos
(P400,000,000.00) in net worth.
The Commissioner may, as a pre-licensing
requirement of a new insurance company, in
addition to the paid-up capital stock, require
the stockholders to pay in cash to the company
in proportion to their subscription interests a
contributed surplus fund of not less than One
hundred million pesos (P100,000,000.00). He
may also require such company to submit to
him a business plan showing the company’s
estimated receipts and disbursements, as well
as the basis therefor, for the next succeeding
three (3) years.
If organized as a mutual company, in lieu of
such net worth, it must have available total
members equity in an amount to be determined
by the Insurance Commission above all
liabilities for losses reported; expenses, taxes,
legal reserve, and reinsurance of all
outstanding risks, and the contributed surplus
fund equal to the amounts required of stock
corporations. A stock insurance company
doing business in the Philippines may, subject
to the pertinent law and regulation which now
or hereafter may be in force, alter its
organization and transform itself into a mutual
insurance company.
The Secretary of Finance may, upon
recommendation of the Commissioner,
increase such minimum paid-up capital stock
or cash assets requirement under such terms
and conditions as he may impose, to an
amount which, in his opinion, would reasonably
assure the safety of the interests of the
policyholders and the public. The minimum
paid-up capital and net worth requirement must
remain unimpaired for the continuance of the
license. The Commissioner may require the
adoption of the risk-based capital approach
and other internationally accepted forms of
capital framework.
For the purpose of this section, net worth shall
consist of:
(a) Paid-up capital;
(b) Retained earnings;
(c) Unimpaired surplus; and
(d) Revaluation of assets as may be approved
by the Commissioner.
The Commission may adopt for purposes of
compliance with capital build up requirement
under this Code the recognition as part of the
capital account, capital notes or debentures
which are subordinate to all credits and senior
only to common capital stocks.
The President of the Philippines may order a
periodic review every two (2) years the capital
structure set out above to determine the capital
adequacy of the local insurance industry from
and after the integration and liberalization of
the financial services, including insurance, in
the ASEAN Region. For this purpose, a review
committee consisting of representatives from
the Department of Finance (DOF), the
Insurance Commission (IC), the National
Economic and Development Authority (NEDA),
the Securities and Exchange Commission
(SEC) and other agencies which the President
may designate shall conduct the review and
may recommend to the President to adopt for
implementation the necessary capital
adjustment.
Section 195. Every company must, before
engaging in the business of insurance in the
Philippines, file with the Commissioner the
following:
(a) A certified copy of the last annual statement
or a verified financial statement exhibiting the
condition and affairs of such company;
(b) If incorporated under the laws of the
Philippines, a copy of the articles of
incorporation and bylaws, and any
amendments to either, certified by the
Securities and Exchange Commission to be a
copy of that which is filed in its Office;
(c) If incorporated under any laws other than
those of the Philippines, a certificate from the
Securities and Exchange Commission showing
that it is duly registered in the mercantile
registry of that Commission in accordance with
the Corporation Code. A copy of the articles of
incorporation and bylaws, and any
amendments to either, if organized or formed
under any law requiring such to be filed, duly
certified by the officer having the custody of
same, or if not so organized, a copy of the law,
charter or deed of settlement under which the
deed of organization is made, duly certified by
the proper custodian thereof, or proved by
affidavit to be a copy; also, a certificate under
the hand and seal of the proper officer of such
state or country having supervision of
insurance business therein, if any there be,
that such corporation or company is organized
under the laws of such state or country, with
the amount of capital stock or assets and legal
reserve required by this Code;
(d) If not incorporated and of foreign domicile,
aside from the certificate mentioned in
paragraph (c) of this section, a certificate
setting forth the nature and character of the
business, the location of the principal office,
the name of the individual or names of the
persons composing the partnership or
association, the amount of actual capital
employed or to be employed therein, and the
names of all officers and persons by whom the
business is or may be managed.
The certificate must be verified by the affidavit
of the chief officer, secretary, agent, or
manager of the company; and if there are any
written articles of agreement of the company, a
copy thereof must accompany such certificate.
Section 196. The Commissioner must require
as a condition precedent to the transaction of
insurance business in the Philippines by any
foreign insurance company, that such
company file in his office a written power of
attorney designating some person who shall be
a resident of the Philippines as its general
agent, on whom any notice provided by law or
by any insurance policy, proof of loss,
summons and other legal processes may be
served in all actions or other legal proceedings
against such company, and consenting that
service upon such general agent shall be
admitted and held as valid as if served upon
the foreign company at its home office. Any
such foreign company shall, as further
condition precedent to the transaction of
insurance business in the Philippines, make
and file with the Commissioner an agreement
or stipulation, executed by the proper
authorities of said company in form and
substance as follows:
The (name of company) does hereby stipulate
and agree in consideration of the permission
granted by the Insurance Commissioner to
transact business in the Philippines, that if at
any time said company shall leave the
Philippines, or cease to transact business
therein, or shall be without any agent in the
Philippines on whom any notice, proof of loss,
summons, or legal process may be served,
then in any action or proceeding arising out of
any business or transaction which occurred in
the Philippines, service of any notice provided
by law, or insurance policy, proof of loss,
summons, or other legal process may be made
upon the Insurance Commissioner, and that
such service upon the Insurance
Commissioner shall have the same force and
effect as if made upon the company.
Whenever such service of notice, proof of loss,
summons, or other legal process shall be
made upon the Commissioner, he must, within
ten (10) days thereafter, transmit by mail,
postage paid, a copy of such notice, proof of
loss, summons, or other legal process to the
company at its home or principal office. The
sending of such copy by the Commissioner
shall be a necessary part of the service of the
notice, proof of loss, or other legal process.
Section 197. No insurance company organized
or existing under the government or laws other
than those of the Philippines shall engage in
business in the Philippines unless possessed
of unimpaired capital or assets and reserve of
not less than One billion pesos
(P1,000,000,000.00), nor until it shall have
deposited with the Commissioner for the
benefit and security of the policyholders and
creditors of such company in the Philippines,
securities satisfactory to the Commissioner
consisting of good securities of the Philippines,
including new issues of stock of registered
enterprises, as this term is defined in Executive
Order No. 226 of 1987, as amended, to the
actual market value of not less than the amount
herein required: Provided, That at least fifty
percent (50%) of such securities shall consist
of bonds or other instruments of debt of the
Government of the Philippines, its political
subdivisions and instrumentalities, or of
government-owned or -controlled corporations
and entities, including the Bangko Sentral ng
Pilipinas: Provided, further, That the total
investment of a foreign insurance company in
any registered enterprise shall not exceed
twenty percent (20%) of the net worth of said
foreign insurance company nor twenty percent
(20%) of the capital of the registered
enterprise, unless previously authorized in
writing by the Commissioner.
The Commissioner may, as a pre-licensing
requirement of a new branch office of a foreign
insurance company, in addition to the required
asset or net worth, require the company to
have an additional surplus fund in an amount
to be determined by the Insurance
Commission.
For purposes of this Code, the net worth of a
foreign insurance company shall refer only to
its net worth in the Philippines.
Section 198. The Commissioner shall hold the
securities, deposited as required in the
immediately preceding section, for the benefit
and security of all the policyholders and
creditors of the company depositing the
same: Provided, That the Commissioner may
as long as the company is solvent, permit the
company to collect the interest or dividends on
the securities so deposited, and, from time to
time, with his assent, to withdraw any of such
securities, upon depositing with said
Commissioner other like securities, the market
value of which shall be equal to the market
value of such as may be withdrawn. In the
event of any company ceasing to do business
in the Philippines, the securities deposited as
aforesaid shall be returned to the company
upon the Commissioner’s written approval and
only after the company has duly proven in its
application therefor that it has no further liability
whatsoever under any of its policies nor to any
of its creditors in the Philippines.
Section 199. Every foreign company doing
business in the Philippines shall set aside an
amount corresponding to the legal reserves of
the policies written in the Philippines and invest
and keep the same therein in accordance with
the provisions of this section. The legal reserve
therein required to be set aside shall be
invested only in the classes of Philippine
securities described in Section 206: Provided,
however, That no investment in stocks or
bonds of any single entity shall, in the
aggregate exceed twenty percent (20%) of the
net worth of the investing company or twenty
percent (20%) of the capital of the issuing
company, whichever is the lesser, unless
otherwise approved in writing by the
Commissioner. The securities purchased and
kept in the Philippines under this section, shall
not be sent out of the territorial jurisdiction of
the Philippines without the written consent of
the Commissioner.
TITLE 2
SOLVENCY
Section 200. An insurance company doing
business in the Philippines shall at all times
maintain the minimum paid-up capital, and net
worth requirements as prescribed by the
Commissioner. Such solvency requirements
shall be based on internationally accepted
solvency frameworks and adopted only after
due consultation with the insurance industry
associations.
Whenever the aforementioned requirement be
found to be less than that herein required to be
maintained, the Commissioner shall forthwith
direct the company to make good any such
deficiency by cash, to be contributed by all
stockholders of record in proportion to their
respective interests, and paid to the treasurer
of the company, within fifteen (15) days from
receipt of the order: Provided, That the
company in the interim shall not be permitted
to take any new risk of any kind or character
unless and until it make good any such
deficiency: Provided; further, That a
stockholder who aside from paying the
contribution due from him, pays the
contribution due from another stockholder by
reason of the failure or refusal of the latter to
do so, shall have a lien on the certificates of
stock of the insurance company concerned
appearing in its books in the name of the
defaulting stockholder on the date of default,
as well as on any interests or dividends that
have accrued or will accrue to the said
certificates of stock, until the corresponding
payment or reimbursement is made by the
defaulting stockholder.
Section 201. No domestic insurance
corporation shall declare or distribute any
dividend on its outstanding stocks unless it has
met the minimum paid-up capital and net worth
requirements under Section 194 and except
from profits attested in a sworn statement to
the Commissioner by the president or treasurer
of the corporation to be remaining on hand
after retaining unimpaired:
(a) The entire paid-up capital stock;
(b) The solvency requirements defined by
Section 200;
(c) In the case of life insurance corporations,
the legal reserve fund required by Section 217;
(d) In the case of corporations other than life,
the legal reserve fund required by Section 219;
and
(e) A sum sufficient to pay all net losses
reported, or in the course of settlement, and all
liabilities for expenses and taxes.
Any dividend declared or distributed under the
preceding paragraph shall be reported to the
Commissioner within thirty (30) days after such
declaration or distribution.
If the Commissioner finds that any such
corporation has declared or distributed any
such dividend in violation of this section, he
may order such corporation to cease and
desist from doing business until the amount of
such dividend or the portion thereof in excess
of the amount allowed under this section has
been restored to said corporation.
The Commissioner shall prescribe solvency
requirements for branches of foreign insurance
companies operating in the Philippines.
TITLE 3
ASSETS
Section 202. In any determination of the
financial condition of any insurance company
doing business in the Philippines, there shall
be allowed and admitted as assets only such
assets legally or beneficially owned by the
insurance company concerned as determined
by the Commissioner which consist of:
(a) Cash in the possession of the insurance
company or in transit under its control, and the
true and duly verified balance of any deposit of
such company in a financially sound bank or
trust company duly authorized by the Bangko
Sentral ng Pilipinas.
(b) Investments in securities, including money
market instruments, and in real property
acquired or held in accordance with and
subject to the applicable provisions of this
Code and the income realized therefrom or
accrued thereon.
(c) Loans granted by the insurance company
concerned to the extent of that portion thereof
adequately secured by non-speculative assets
with readily realizable values in accordance
with and subject to the limitations imposed by
applicable provisions of this Code.
(d) Policy loans and other policy assets and
liens on policies, contracts or certificates of a
life insurance company, in an amount not
exceeding legal reserves and other policy
liabilities carried on each individual life
insurance policy, contract or certificate.
(e) The net amount of uncollected and deferred
premiums and annuity considerations in the
case of a life insurance company which carries
the full mean tabular reserve liability.
(f) Reinsurance recoverable by the ceding
insurer:
(1) From an insurer authorized to transact
business in this country, the full amount
thereof; or
(2) From an insurer not authorized in this
country, in an amount not exceeding the
liabilities carried by the ceding insurer for
amounts withheld under a reinsurance treaty
with such unauthorized insurer as security for
the payment of obligations thereunder if such
funds are held subject to withdrawal by, and
under the control of, the ceding insurer. The
Commissioner may prescribe the conditions
under which a ceding insurer may be allowed
credit, as an asset or as a deduction from loss
and unearned premium reserves, for
reinsurance recoverable from an insurer not
authorized in this country but which presents
satisfactory evidence that it meets the
applicable standards of solvency required in
this country.
(g) Funds withheld by a ceding insurer under a
reinsurance treaty, provided reserves for
unpaid losses and unearned premiums are
adequately provided.
(h) Deposits or amounts recoverable from
underwriting associations, syndicates and
reinsurance funds, or from any suspended
banking institution, to the extent deemed by the
Commissioner to be available for the payment
of losses and claims and values to be
determined by him.
(i) Electronic data processing machines, as
may be authorized by the Commissioner to be
acquired by the insurance company
concerned, the acquisition cost of which to be
amortized in equal annual amounts within a
period of five (5) years from the date of
acquisition thereof.
(j) Investments in mutual funds, real estate
investment trusts, salary loans, unit investment
trust funds and special deposit accounts,
subject to the conditions as may be provided
for by the Commissioner.
(k) Other assets, not inconsistent with the
provisions of paragraphs (a) to (j) hereof, which
are deemed by the Commissioner to be readily
realizable and available for the payment of
losses and claims at values to be determined
by him in a circular, rule or regulation.
Section 203. In addition to such assets as the
Commissioner may from time to time
determine to be non-admitted assets of
insurance companies doing business in the
Philippines, the following assets shall in no
case be allowed as admitted assets of an
insurance company doing business in the
Philippines, in any determination of its financial
condition:
(a) Goodwill, trade names, and other like
intangible assets.
(b) Prepaid or deferred charges for expenses
and commissions paid by such insurance
company.
(c) Advances to officers (other than policy
loans), which are not adequately secured and
which are not previously authorized by the
Commissioner, as well as advances to
employees, agents, and other persons on
mere personal security.
(d) Shares of stock of such insurance
company, owned by it, or any equity therein as
well as loans secured thereby, or any
proportionate interest in such shares of stock
through the ownership by such insurance
company of an interest in another corporation
or business unit.
(e) Furniture, furnishing, fixtures, safes,
equipment, library, stationery, literature, and
supplies.
(f) Items of bank credits representing checks,
drafts or notes returned unpaid after the date
of statement.
(g) The amount, if any, by which the aggregate
value of investments as carried in the ledger
assets of such insurance company exceeds
the aggregate value thereof as determined in
accordance with the provisions of this Code
and/or the rules of the Commissioner.
All non-admitted assets and all other assets of
doubtful value or character included as ledger
or non-ledger assets in any statement
submitted by an insurance company to the
Commissioner, or in any insurance examiner’s
report to him, shall also be reported, to the
extent of the value disallowed as deductions
from the gross assets of such insurance
company, except where the Commissioner
permits a reserve to be carried among the
liabilities of such insurance company in lieu of
any such deduction.
TITLE 4
INVESTMENTS
Section 204. A life insurance company may
lend to any of its policyholders upon the
security of the value of its policy such sum as
may be determined pursuant to the provisions
of the policy.
No insurance company shall loan any of its
money or deposits to any person, corporation
or association, except upon the security of any
of the following:
(a) First mortgage or deeds of trust of
registered, unencumbered, improved or
unimproved real estate, including
condominiums;
(b) First mortgages or deeds of trust of actually
cultivated, improved and unencumbered
agricultural lands in the Philippines;
(c) Purchase money mortgages, lease
purchase agreements or similar securities
executed or received by it on account of the
sale or exchange of real property acquired
pursuant to Sections 206 and 208;
(d) Bonds or other instruments of indebtedness
issued or guaranteed by the Government of the
Philippines or its political subdivisions
authorized by law to incur such obligations or
issue such guarantees or of government-
owned or -controlled corporations and
instrumentalities including the Bangko Sentral
ng Pilipinas; or
(e) Obligations issued or guaranteed by
universal banks, commercial banks, offshore
banking units, investment houses or other
financial intermediaries duly registered with the
Bangko Sentral ng Pilipinas; or
(f) Obligations issued or guaranteed by foreign
banks or corporations, each of which shall
have total net worth of at least One hundred
fifty million US dollars ($US150,000,000.00) or
such other higher net worth as may be
prescribed by the Insurance Commission, as
shown in their financial statements as of the
immediately preceding fiscal year; or
(g) Assignments of monetary instruments such
as cash deposits, deposit certificates or other
similar instruments of universal banks,
commercial banks, investment houses or other
financial intermediaries duly registered with the
Bangko Sentral ng Pilipinas; or
(h) Pledges of shares of stock, bonds or other
instruments of indebtedness specified in
Section 209; or
(i) Chattel mortgages over equipment not more
than three (3) years old; and
(j) Such other security as may be approved by
the Commissioner.
The loans provided in the preceding
subsection shall be subject to the following
conditions:
(1) The amount of loan secured by real estate
mortgage over a non-agricultural land shall not
exceed seventy percent (70%) of its appraised
value, and in the case of a loan secured by a
real estate mortgage over an agricultural land,
the amount of loan shall not exceed forty
percent (40%) of its market value: Provided,
That, in no case shall such loan have a maturity
period in excess of twenty-five (25) years;
(2) Unless approved by the Commissioner, no
loan may be granted upon the security of a
mortgage on improved real estate if the
improvements thereon do not belong to the
owner of the land, and the owner of the
improvements does not sign the deed of
mortgage. However, if the owner of the land is
the Government of the Philippines or any of its
political subdivisions and a long-term lease has
been executed in favor of the owner of the
improvements, the owner of the land need not
be a party to the deed of mortgage. The
expiration date of the lease shall not, however,
precede the maturity of the loan. The phrase
‘improved real estate’ as used herein shall
mean land with permanent building or buildings
erected thereon;
(3) Lease-agreements or similar securities
received on the sale of real estate property
shall not exceed one hundred percent (100%)
of the selling price of said property, or one
hundred percent (100%) of its market value at
the time of its disposition, whichever amount is
lower. However, in no case shall such
agreement have a maturity period not
exceeding thirty (30) years;
(4) Loans secured by shares of stock of solvent
corporations or institutions shall not exceed
fifty percent (50%) of:
(i) The weighted average market price for the
one hundred eighty (180) days preceding the
approval of the loan for shares listed in the
stock exchange; and
(ii) For unlisted shares, the adjusted book
value of such shares.
(5) Loans secured by the chattel mortgages
over equipment shall not exceed seventy
percent (70%) of the market value of said
equipment.
Section 205. No loan by any insurance
company on the security of real estate shall be
made unless the title to such real estate shall
have first been registered in accordance with
the existing Land Registration Act, or shall
have been previously registered under the
provisions of the existing Mortgage Law and
the lien or interest of the insurance company
as mortgagee has been registered.
Section 206. (a) An insurance company may
purchase, hold, own and convey such
property, real and personal, as may have been
mortgaged, pledged, or conveyed to it in good
faith in trust for its benefit by reason of money
loaned by it in pursuance of the regular
business of the company, and such real or
personal property as may have been
purchased by it at sales under pledges,
mortgages or deeds of trust for its benefit on
account of money loaned by it; and such real
and personal property as may have been
conveyed to it by borrowers in satisfaction and
discharge of loans made by the company in
payment or by reason of any loan made by the
company in payment or by reason of any loan
made by it shall be sold by the company within
twenty (20) years after the title thereto has
been vested in it.
(b) An insurance company may purchase,
hold, and own the following:
(1) Real properties which serve as its main
place of business and/or branch
offices: Provided, That such investment shall
not in the overall exceed twenty percent (20%)
of its net worth as shown by its latest financial
statement approved by the Commissioner.
(2) Bonds or other instruments of indebtedness
of the Government of the Philippines or its
political subdivisions authorized by law to issue
bonds at the reasonable market value thereof.
(3) Bonds or other instruments of debt of
government-owned or -controlled corporations
and entities, including the Bangko Sentral ng
Pilipinas.
(4) Bonds, debentures or other instruments of
indebtedness of any solvent corporation or
institution created or existing under the laws of
the Philippines:
Provided, however, That the issuing, assuming
or guaranteeing entity or its predecessors shall
not have defaulted in the payment of interest
on any of its securities and that during each of
any three (3) including the last two (2) of the
five (5) fiscal years next preceding the date of
acquisition by such insurance company of such
bonds, debentures, or other instruments of
indebtedness, the net earnings of the issuing,
assuming or guaranteeing institution available
for its fixed charges, as hereinafter defined,
shall have been not less than one and one-
quarter (1¼) times the total of its fixed charges
for such year: Provided, further, That no life
insurance company shall invest in or loan upon
the obligations of any one institution in the
kinds permitted under this subsection an
amount in excess of twenty-five percent (25%)
of the total admitted assets of such insurer as
of December thirty-first next preceding the date
of such investment.
As used in this subsection the term net
earnings available for fixed charges shall mean
net income after deducting operating and
maintenance expenses, taxes other than
income taxes, depreciation and depletion; but
excluding extraordinary nonrecurring items of
income or expense appearing in the regular
financial statement of the issuing, assuming or
guaranteeing institution. The term fixed
charges shall include interest on funded and
unfunded debt, amortization of debt discount,
and rentals for leased properties.
(5) Preferred or guaranteed stocks of any
solvent corporation or institution created or
existing under the laws of the
Philippines: Provided, That if the stocks are
guaranteed, the amount of stocks so
guaranteed is not in excess of fifty percent
(50%) of the amount of the preferred or
common stocks, as the case may be, of the
guaranteeing corporation: Provided, finally,
That no life insurance company shall invest in
or loan upon obligations of any one institution
in the kinds permitted under this subsection an
amount in excess of ten percent (10%) of the
total admitted assets of such insurer as of
December thirty-first next preceding the date of
such investment.
(6) Common stocks of any solvent corporation
or institution created or existing under the laws
of the Philippines: Provided, however, That no
life insurance company shall invest in or loan
upon the obligations of any one corporation or
institution in the kinds permitted under this
subsection an amount in excess of ten percent
(10%) of the total admitted assets of such
insurer as of December thirty-first next
preceding the date of such investment.
(7) Securities issued by a registered
enterprise, as this term is defined in Executive
Order No. 226, otherwise known as the
Omnibus Investments Code of 1987, as
amended: Provided, That the total investment
of a domestic non-life insurance company in
any registered enterprise shall not exceed
twenty percent (20%) of the net worth of said
insurance company as shown by its aforesaid
financial statement unless previously
authorized by the Commissioner.
(8) Certificates, notes and other obligations
issued by the trustees or receivers of any
institution created or existing under the laws of
the Philippines which, or the assets of which,
are being administered under the direction of
any court having jurisdiction: Provided,
however, That such certificates, notes or other
obligations are adequately secured as to
principal and interests.
(9) Equipment trust obligations or certificates
which are adequately secured or other
adequately secured instruments evidencing an
interest in equipment wholly or in part within the
Philippines: Provided, however, That there is a
right to receive determined portions of rental,
purchase or other fixed obligatory payments for
the use or purchase of such equipment.
(10) Any obligation of any corporation or
institution created or existing under the laws of
the Philippines which is, on the date of
acquisition by the insurer, adequately secured
and has qualities and characteristics wherein
the speculative elements are not predominant.
(11) Such other securities as may be approved
by the Commissioner.
(c) Any domestic insurer which has
outstanding insurance, annuity or reinsurance
contracts in currencies other than the national
currency of the Philippines may invest in, or
otherwise acquire or loan upon securities and
investments in such currency which are
substantially of the same kinds, classes and
investment grades as those eligible for
investment under the foregoing subdivisions of
this section; but the aggregate amount of such
investments and of such cash in such currency
which is at any time held by such insurer shall
not exceed one and one-half (1½) times the
amount of its reserves and other obligations
under such contracts or the amount which such
insurer is required by the law of any country or
possession outside the Republic of the
Philippines to be invested in such country or
possession, whichever shall be greater.
Section 207. An insurance company may:
(1) Invest in equities of other financial
institutions; and
(2) Engage in the buying and selling of long-
term debt instruments: Provided, That any or
all of such investments shall be with the prior
approval of the Commissioner. Insurance
companies may, however, invest in listed
equities of other financial institutions without
need of prior approval by the Commissioner.
Section 208. Any life insurance company may:
(a) Acquire or construct housing projects and,
in connection with any such project, may
acquire land or any interest therein by
purchase, lease or otherwise, or use land
acquired pursuant to any other provision of this
Code. Such company may thereafter own,
maintain, manage, collect or receive income
from, or sell and convey, any land or interest
therein so acquired and any improvements
thereon. The aggregate book value of the
investments of any such company in all such
projects shall not exceed at the time of such
investments twenty-five percent (25%) of the
total admitted assets of such company on the
thirty-first day of December next
preceding: Provided, That the funds of the
company for the payment of pending claims
and obligations shall not be used for such
investments.
(b) Acquire real property, other than property to
be used primarily for providing housing and
property for accommodation of its own
business, as an investment for the production
of income, or may acquire real property to be
improved or developed for such investment
purpose pursuant to a program therefor,
subject to the condition that the cost of each
parcel of real property so acquired under the
authority of this paragraph (b), including the
estimated cost to the company of the
improvement or development thereof, when
added to the book value of all other real
property held by it pursuant to this paragraph
(b), shall not exceed twenty-five percent (25%)
of its admitted assets as of the thirty-first day of
December next preceding.
Section 209. Every domestic insurance
company shall, to the extent of an amount
equal in value to twenty-five percent (25%) of
the minimum net worth required under Section
194, invest its funds only in securities,
satisfactory to the Commissioner, consisting of
bonds or other instruments of debt of the
Government of the Philippines or its political
subdivisions or instrumentalities, or of
government-owned or -controlled corporations
and entities, including the Bangko Sentral ng
Pilipinas: Provided, That such investments
shall at all times be maintained free from any
lien or encumbrance: Provided, further, That
such securities shall be deposited with and
held by the Commissioner for the faithful
performance by the depositing insurer of all its
obligations under its insurance contracts. The
provisions of Section 198 shall, so far as
practicable, apply to the securities deposited
under this section.
Except as otherwise provided in this Code, no
judgment creditor or other claimant shall have
the right to levy upon any of the securities of
the insurer held on deposit under this section
or held on deposit pursuant to the requirement
of the Commissioner.
Section 210. After satisfying the requirements
contained in the preceding section, any
domestic non-life insurance company, shall
invest, to an amount prescribed below, its
funds in, or otherwise, acquire or loan upon,
only the classes of investments described in
Section 206, including securities issued by any
registered enterprise, as this term is defined in
Executive Order No. 226, otherwise known as
‘The Omnibus Investments Code of 1987′ and
such other classes of investments as may be
authorized by the Commissioner for purposes
of this section: Provided, That:
(a) No more than twenty percent (20%) of the
net worth of such company as shown by its
latest financial statement approved by the
Commissioner shall be invested in the lot and
building in which the insurance company
conducts its business; and
(b) The total investment of an insurance
company in any registered enterprise shall not
exceed twenty percent (20%) of the net worth
of said insurance company as shown by its
aforesaid financial statement nor twenty
percent (20%) of the paid-up capital of the
registered enterprise excluding the intended
investment, unless previously authorized by
the Commissioner: Provided, further, That
such investments, free from any lien or
encumbrance, shall be at least equal in amount
to the aggregate amount of: (1) its legal
reserve, as provided in Section 219, and (2) its
reserve fund held for reinsurance as provided
for in the pertinent treaty provision in the case
of reinsurance ceded to authorized insurers.
Section 211. After satisfying the requirements
contained in Sections 197, 199, 209 and 210,
any non-life insurance company may invest
any portion of its funds representing earned
surplus in any of the investments described in
Sections 204, 206 and 207, or in any securities
issued by a registered enterprise mentioned in
the preceding sections: Provided, That no
investment in stocks or bonds of any single
entity shall in the aggregate, exceed twenty
percent (20%) of the net worth of the insurance
company as shown in its latest financial
statement approved by the Commissioner or
twenty percent (20%) of the paid-up capital of
the issuing company, whichever is lesser,
unless otherwise approved by the
Commissioner.
Section 212. After satisfying the minimum
capital investment required in Section 209, any
life insurance company may invest its legal
policy reserve, as provided in Section 217 or in
Section 218, in any of the classes of securities
or types of investments described in Sections
204, 206, 207 and 208, subject to the
limitations therein contained, and in any
securities issued by any registered enterprise
mentioned in Section 210, free from any lien or
encumbrance, in such amounts as may be
approved by the Commissioner. Such
company may likewise invest any portion of its
earned surplus in the aforesaid securities or
investments subject to the aforesaid
limitations.
Section 213. Any investment made in violation
of the applicable provisions of this title shall be
considered non-admitted assets.
Section 214. (a) All bonds or other instruments
of indebtedness having a fixed term and rate of
interest and held by any life insurance
company authorized to do business in this
country, if amply secured and if not in default
as to principal or interest, shall be valued
based on their amortized cost using effective
interest method less impairment and
unrecoverable amount based on appropriate
measurement methods which are generally
accepted in the industry and accepted by the
Commissioner. The Commissioner shall have
the power to determine the eligibility of any
such investments for valuation on the basis of
amortization, and may by regulation prescribe
or limit the classes of securities so eligible for
amortization. All bonds or other instruments of
indebtedness which in the judgment of the
Commissioner are not amply secured shall not
be eligible for amortization and shall be valued
in accordance with paragraph two. The
Commissioner may, if he finds that the interest
of policyholders so permit or require, by official
regulation permit or require any class or
classes of insurers, other than life insurance
companies authorized to do business in this
country, to value their bonds or other
instruments of indebtedness in accordance
with the foregoing rule.
(b) The investments of all insurers authorized
to do business in this country, except securities
subject to amortization and except as
otherwise provided in this chapter, shall be
valued, in the discretion of the Commissioner,
at their amortized cost using effective interest
method less impairment and unrecoverable
amount or at valuation representing their fair
market value. If the Commissioner finds that in
view of the character of investments of any
insurer authorized to do business in this
country it would be prudent for such insurer to
establish a special reserve for possible losses
or fluctuations in the values of its investments,
he may require such insurer to establish such
reserve, reasonable in amount, and include a
report thereon in any statement or report of the
financial condition of such insurer. The
Commissioner may, in connection with any
examination or required financial statement of
an authorized insurer, require such insurer to
furnish him complete financial statements and
audited report of the financial condition of any
corporation of which the securities are owned
wholly or partly by such insurer and may cause
an examination to be made of any subsidiary
or affiliate of such insurer as appropriate to
specific investments as provided in appropriate
circulars issued by the Commissioner.
(c) Investments in equity of an insurance
company shall be valued as follows:
(1) Listed stocks shall be valued at market
value and periodically adjusted to reflect
market changes through a special valuation
account to reflect their realizable value when
sold;
(2) Unlisted stocks shall be valued at adjusted
book value based on the latest unqualified
audited financial statements of the company
which issued such stocks; and
(3) Stocks of a corporation under the control of
the insurer shall be valued using the equity
method which is the cost plus or minus the
share of the controlling company in the
earnings or losses of the controlled company
after acquisition of such stocks.
(d) The stock of an insurance company shall be
valued at the lesser of its market value or its
book value as shown by its last approved
audited financial statement or the last report on
examination, whichever is more recent. The
book value of a share of common stock of an
insurance company shall be ascertained by
dividing (1) the amount of its capital and
surplus less the value of all of its preferred
stock, if any, outstanding, by (2) the number of
shares of its common stock issued and
outstanding.
Notwithstanding the foregoing provisions, an
insurer may, at its option, value its holdings of
stock in a subsidiary insurance company in an
amount not less than acquisition cost if such
acquisition cost is less than the value
determined as hereinbefore provided.
(e) Real estate acquired by foreclosure or by
deed in lieu thereof, in the absence of a recent
appraisal deemed by the Commissioner to be
reliable, shall not be valued at an amount
greater than the unpaid principal of the
defaulted loan at the date of such foreclosure
or deed, together with any taxes and expenses
paid or incurred by such insurer at such time in
connection with such acquisition, and the cost
of additions or improvements thereafter paid by
such insurer and any amount or amounts
thereafter paid by such insurer or any
assessments levied for improvements in
connection with the property.
(f) Purchase money mortgages received on
dispositions of real property held pursuant to
Section 208 shall be valued in an amount
equivalent to ninety percent (90%) of the value
of such real property. Purchase money
mortgages received on disposition of real
property otherwise held shall be valued in an
amount not exceeding ninety percent (90%) of
the value of such real property as determined
by an appraisal made by an appraiser at or
about the time of disposition of such real
property.
(g) The stock of a subsidiary of an insurer shall
be valued on the basis of the greater of:
(1) The value of only such of the assets of such
subsidiary as would constitute lawful
investments for the insurer if acquired or held
directly by the insurer; or
(2) Such other value determined pursuant to
standards and cumulative limitations,
contained in a regulation to be promulgated by
the Commissioner.
(h) Notwithstanding any provision contained in
this section or elsewhere in this chapter, if the
Commissioner finds that the interests of
policyholders so permit or require, he may
permit or require any class or classes of
insurers authorized to do business in this
country to value their investments or any class
or classes thereof as of any date heretofore or
hereafter in accordance with any applicable
valuation or method.
Section 215. It shall be the duty of the officers
of the insurance company to report within the
first fifteen (15) days of every month all such
investments as may be made by them during
the preceding month, and the Commissioner
may, if such investments or any of them seem
injudicious to him, require the sale or disposal
of the same. The report shall also include a list
of investments sold or disposed of by the
company during the same period.
TITLE 5
RESERVES
Section 216. Every life insurance company,
doing business in the Philippines, shall
annually make a valuation of all policies,
additions thereto, unpaid dividends, and all
other obligations outstanding on the thirty-first
day of December of the preceding year. All
such valuations shall be made according to the
standard adopted by the company, as
prescribed by the Commissioner in accordance
with internationally accepted actuarial
standards, which standard shall be stated in its
annual report.
Such standard of valuations shall be according
to a standard table of mortality with interest to
be determined by the Insurance
Commissioner. When the preliminary term
basis is used, the term insurance shall be
limited to the first policy year.
The results of such valuations shall be reported
to the Commissioner on or before the thirtieth
day of April of each year accompanied by a
sworn statement of a designated company
officer and stating the methods and
assumptions used in arriving at the values
reported.
Section 217. The aggregate net value so
ascertained of the policies of such company
shall be deemed its reserve liability, to provide
for which it shall hold funds in secure
investments equal to such net value, above all
its other liabilities; and it shall be the duty of the
Commissioner, after having verified, to such an
extent as he may deem necessary, the
valuation of all policies in force, to satisfy
himself that the company has such amount in
safe legal securities after all other debts and
claims against it have been provided for.
The reserve liability for variable contracts
defined in Section 238 shall be established in
accordance with actuarial procedures that
recognize the variable nature of the benefits
provided, and shall be approved by the
Commissioner.
Section 218. Every life insurance company,
conducted on the mutual plan or a plan in
which policyholders are by the terms of their
policies entitled to share in the profits or
surplus shall, on all policies of life insurance
heretofore or hereafter issued, under the
conditions of which the distribution of surplus is
deferred to a fixed or specified time and
contingent upon the policy being in force and
the insured living at that time, annually
ascertain the amount of the surplus to which all
such policies as a separate class are entitled,
and shall annually apportion to such policies as
a class the amount of the surplus so
ascertained, and carry the amount of such
apportioned surplus, plus the actual interest
earnings and accretions to such fund, as a
distinct and separate liability to such class of
policies on and for which the same was
accumulated, and no company or any of its
officers shall be permitted to use any part of
such apportioned surplus fund for any purpose
whatsoever other than for the express purpose
for which the same was accumulated.
Section 219. Every insurance company, other
than life, shall maintain a reserve for unearned
premiums on its policies in force, which shall
be charged as a liability in any determination of
its financial condition. Such reserve shall be
calculated based on the twenty-fourth (24th)
method.
Section 220. In addition to its liabilities and
reserves on contracts of insurance issued by it,
every insurance company shall be charged
with the estimated amount of all of its other
liabilities, including taxes, expenses and other
obligations due or accrued at the date of
statement, and including any special reserves
required by the Commissioner pursuant to the
provisions of this Code.
TITLE 6
LIMIT OF SINGLE RISK
Section 221. No insurance company other than
life, whether foreign or domestic, shall retain
any risk on any one subject of insurance in an
amount exceeding twenty percent (20%) of its
net worth. For purposes of this section, the
term subject of insurance shall include all
properties or risks insured by the same insurer
that customarily are considered by non-life
company underwriters to be subject to loss or
damage from the same occurrence of any
hazard insured against.
The Commissioner may issue regulations
providing for a maximum limit on the overall
retained risks of insurers to serve as a
catastrophe cover requirement for the same.
Reinsurance ceded as authorized under the
succeeding title shall be deducted in
determining the risk retained. As to surety risk,
deduction shall also be made of the amount
assumed by any other company authorized to
transact surety business and the value of any
security mortgaged, pledged, or held subject to
the surety’s control and for the surety’s
protection.
TITLE 7
REINSURANCE TRANSACTIONS
Section 222. An insurance company doing
business in the Philippines may accept
reinsurances only of such risks, and retain risk
thereon within such limits, as it is otherwise
authorized to insure.
Section 223. No insurance company doing
business in the Philippines shall cede all or part
of any risks situated in the Philippines by way
of reinsurance directly to any foreign insurer
not authorized to do business in the Philippines
unless such foreign insurer or, if the services of
a nonresident broker are utilized, such
nonresident broker is represented in the
Philippines by a resident agent duly registered
with the Commissioner as required in this
Code.
The resident agent of such unauthorized
foreign insurer or nonresident broker shall
immediately upon registration furnish the
Commissioner with the annual statement of
such insurer, or of such company or
companies where such broker may place
Philippine business as of the year preceding
such registration, and annually thereafter as
soon as available.
Section 224. All insurance companies, both life
and non-life, authorized to do business in the
Philippines shall cede their excess risks to
other companies similarly authorized to do
business in the Philippines in such amounts
and under such arrangements as would be
consistent with sound underwriting practices
before they enter into reinsurance
arrangements with unauthorized foreign
insurers.
Section 225. Any insurance company doing
business in the Philippines desiring to cede
their excess risks to foreign insurance or
reinsurance companies not authorized to
transact business in the Philippines may do so
under such terms and conditions which the
Commissioner may prescribe.
Should any reinsurance agreement be for any
reason cancelled or terminated, the ceding
company concerned shall inform the
Commissioner in writing of such cancellation or
termination within thirty (30) days from the date
of such cancellation or termination or from the
date notice or information of such cancellation
or termination is received by such company as
the case may be.
Section 226. Every insurance company
authorized to do business in the Philippines
shall report to the Commissioner on forms
prescribed by him the particulars of
reinsurance treaties or any new treaties or
changes in existing treaties within three (3)
months from their effectivity.
Section 227. No credit shall be allowed as an
admitted asset or as a deduction from liability,
to any ceding insurer for reinsurance made,
ceded, renewed, or otherwise becoming
effective after January 1, 1975, unless the
reinsurance shall be payable by the assuming
insurer on the basis of the liability of the ceding
insurer under the contract or contracts
reinsured without diminution because of the
insolvency of the ceding insurer nor unless
under the contract or contracts of reinsurance
the liability for such reinsurance is assumed by
the assuming insurer or insurers as of the
same effective date; nor unless the
reinsurance agreement provides that
payments by the assuming insurer shall be
made directly to the ceding insurer or to its
liquidator, receiver, or statutory successor
except:
(a) Where the contract specifically provides
another payee of such reinsurance in the event
of the insolvency of the ceding insurer; and
(b) Where the assuming insurer with the
consent of the direct insured or insureds has
assumed such policy obligations of the ceding
insurer as direct obligations of the assuming
insurer to the payees under such policies and
in substitution for the obligations of the ceding
insurer to such payees.
Section 228. No life insurance company doing
business in the Philippines shall reinsure its
whole risk on any individual life or joint lives, or
substantially all of its insurance in force,
without having first obtained the written
permission of the Commissioner.
TITLE 8
ANNUAL STATEMENT
Section 229. Every insurance company doing
business in the Philippines shall terminate its
fiscal period on the thirty-first day of December
every year, and shall annually on or before the
thirtieth day of April of each year render to the
Commissioner a statement signed and sworn
to by the chief officer of such company
showing, in such form and details as may be
prescribed by the Commissioner, the exact
condition of its affairs on the preceding thirty-
first day of December.
The annual statement shall be prepared in
accordance with the financial reporting
framework as determined by the
Commissioner. In addition, the Commissioner
may require other relevant information. The
form and details of such other relevant
information shall be prescribed by the
Commissioner and shall form part of the
supplementary schedules to the annual
statement.
Any entry in the statement which is found to be
false shall constitute a misdemeanor and the
officer signing such statement shall be subject
to the penalty provided for under Section 442.
Section 230. Every insurance company
authorized under Title 10 of this chapter to
issue, deliver or use variable contracts shall
annually file with the Commissioner separate
annual statement of its separate variable
accounts. Such statement shall be on a form
prescribed or approved by the Commissioner
and shall include details as to all of the income,
disbursements, assets and liability items of and
associated with the said separate variable
accounts. Said statement shall be under oath
of two (2) officers of the company and shall be
filed simultaneously with the annual statement
required by the preceding section.
Section 231. Within thirty (30) days after
receipt of the annual statement approved by
the Commissioner, every insurance company
doing business in the Philippines shall publish
in a newspaper of general circulation, a full
synopsis of its annual financial statement
showing fully the conditions of its business,
and setting forth its resources and liabilities in
accordance with such form prescribed by the
Commissioner.
The Commissioner shall have the authority to
make, amend, and rescind such accounting
rules and regulations as may be necessary to
carry out the provisions of this Code, and
define accounting, technical and trade terms
used in this Code: Provided, That such shall be
in accordance with internationally accepted
accounting standards. Among other things, the
Commissioner may prescribe the form or forms
in which required information shall be set forth,
the items or details to be shown in the balance
sheet and income statement, and the methods
to be followed in the preparation of accounts,
appraisal or valuation of assets and liabilities,
determination of recurring and nonrecurring
income, differentiation of investment and
operating income, and in the preparation,
where the Commissioner deems it necessary
or desirable, of consolidated balance sheets or
income accounts of any person directly or
indirectly controlling or controlled by the
insurance company.
TITLE 9
POLICY FORMS
Section 232. No policy, certificate or contract of
insurance shall be issued or delivered within
the Philippines unless in the form previously
approved by the Commissioner, and no
application form shall be used with, and no
rider, clause, warranty or endorsement shall be
attached to, printed or stamped upon such
policy, certificate or contract unless the form of
such application, rider, clause, warranty or
endorsement has been approved by the
Commissioner.
Section 233. In the case of individual life or
endowment insurance, the policy shall contain
in substance the following conditions:
(a) A provision that the policyholder is entitled
to a grace period either of thirty (30) days or of
one (1) month within which the payment of any
premium after the first may be made, subject at
the option of the insurer to an interest charge
not in excess of six percent (6%) per annum for
the number of days of grace elapsing before
the payment of the premium, during which
period of grace the policy shall continue in full
force, but in case the policy becomes a claim
during the said period of grace before the
overdue premium is paid, the amount of such
premium with interest may be deducted from
the amount payable under the policy in
settlement;
(b) A provision that the policy shall be
incontestable after it shall have been in force
during the lifetime of the insured for a period of
two (2) years from its date of issue as shown in
the policy, or date of approval of last
reinstatement, except for nonpayment of
premium and except for violation of the
conditions of the policy relating to military or
naval service in time of war;
(c) A provision that the policy shall constitute
the entire contract between the parties, but if
the company desires to make the application a
part of the contract it may do so provided a
copy of such application shall be indorsed
upon or attached to the policy when issued,
and in such case the policy shall contain a
provision that the policy and the application
therefor shall constitute the entire contract
between the parties;
(d) A provision that if the age of the insured is
considered in determining the premium and the
benefits accruing under the policy, and the age
of the insured has been misstated, the amount
payable under the policy shall be such as the
premium would have purchased at the correct
age;
(e) If the policy is participating, a provision that
the company shall periodically ascertain and
apportion any divisible surplus accruing on the
policy under conditions specified therein;
(f) A provision specifying the options to which
the policyholder is entitled to in the event of
default in a premium payment after three (3) full
annual premiums shall have been paid. Such
option shall consist of:
(1) A cash surrender value payable upon
surrender of the policy which shall not be less
than the reserve on the policy, the basis of
which shall be indicated, for the then current
policy year and any dividend additions thereto,
reduced by a surrender charge which shall not
be more than one-fifth (1/5) of the entire
reserve or two and one-half percent (2½%) of
the amount insured and any dividend additions
thereto; and
(2) One or more paid-up benefits on a plan or
plans specified in the policy of such value as
may be purchased by the cash surrender
value.
(g) A provision that at any time after a cash
surrender value is available under the policy
and while the policy is in force, the company
will advance, on proper assignment or pledge
of the policy and on sole security thereof, a
sum equal to, or at the option of the owner of
the policy, less than the cash surrender value
on the policy, at a specified rate of interest, not
more than the maximum allowed by law, to be
determined by the company from time to time,
but not more often than once a year, subject to
the approval of the Commissioner; and that the
company will deduct from such loan value any
existing indebtedness on the policy and any
unpaid balance of the premium for the current
policy year, and may collect interest in advance
on the loan to the end of the current policy year,
which provision may further provide that such
loan may be deferred for not exceeding six (6)
months after the application therefor is made;
(h) A table showing in figures cash surrender
values and paid-up options available under the
policy each year upon default in premium
payments, during at least twenty (20) years of
the policy beginning with the year in which the
values and options first become available,
together with a provision that in the event of the
failure of the policyholder to elect one of the
said options within the time specified in the
policy, one of said options shall automatically
take effect and no policyholder shall ever forfeit
his right to same by reason of his failure to so
elect;
(i) In case the proceeds of a policy are payable
in installments or as an annuity, a table
showing the minimum amounts of the
installments or annuity payments;
(j) A provision that the policyholder shall be
entitled to have the policy reinstated at any
time within three (3) years from the date of
default of premium payment unless the cash
surrender value has been duly paid, or the
extension period has expired, upon production
of evidence of insurability satisfactory to the
company and upon payment of all overdue
premiums and any indebtedness to the
company upon said policy, with interest rate
not exceeding that which would have been
applicable to said premiums and indebtedness
in the policy years prior to reinstatement.
Any of the foregoing provisions or portions
thereof not applicable to single premium or
term policies shall to that extent not be
incorporated therein; and any such policy may
be issued and delivered in the Philippines
which in the opinion of the Commissioner
contains provisions on any one or more of the
foregoing requirements more favorable to the
policyholder than hereinbefore required.
This section shall not apply to policies of group
life or industrial life insurance.
Section 234. No policy of group life insurance
shall be issued and delivered in the Philippines
unless it contains in substance the following
provisions, or provisions which in the opinion of
the Commissioner are more favorable to the
persons insured, or at least as favorable to the
persons insured and more favorable to the
policyholders:
(a) A provision that the policyholder is entitled
to a grace period of either thirty (30) days or of
one (1) month for the payment of any premium
due after the first, during which grace period
the death benefit coverage shall continue in
force, unless the policyholder shall have given
the insurer written notice of discontinuance in
advance of the date of discontinuance and in
accordance with the terms of the policy. The
policy may provide that the policyholder shall
be liable for the payment of a pro rata premium
for the time the policy is in force during such
grace period;
(b) A provision that the validity of the policy
shall not be contested, except for nonpayment
of premiums after it has been in force for two
(2) years from its date of issue; and that no
statement made by any insured under the
policy relating to his insurability shall be used
in contesting the validity of the insurance with
respect to which such statement was made
after such insurance has been in force prior to
the contest for a period of two (2) years during
such person’s lifetime nor unless contained in
a written instrument signed by him;
(c) A provision that a copy of the application, if
any, of the policyholder shall be attached to the
policy when issued, that all statements made
by the policyholder or by persons insured shall
be deemed representations and not
warranties, and that no statement made by any
insured shall be used in any contest unless a
copy of the instrument containing the
statement is or has been furnished to such
person or to his beneficiary;
(d) A provision setting forth the conditions, if
any, under which the insurer reserves the right
to require a person eligible for insurance to
furnish evidence of individual insurability
satisfactory to the insurer as a condition to part
or all of his coverage;
(e) A provision specifying an equitable
adjustment of premiums or of benefits or of
both to be made in the event that the age of a
person insured has been misstated, such
provision to contain a clear statement of the
method of adjustment to be used;
(f) A provision that any sum becoming due by
reason of death of the person insured shall be
payable to the beneficiary designated by the
insured, subject to the provisions of the policy
in the event that there is no designated
beneficiary, as to all or any part of such sum,
living at the death of the insured, and subject
to any right reserved by the insurer in the policy
and set forth in the certificate to pay at its
option a part of such sum not exceeding Five
hundred pesos (P500.00) to any person
appearing to the insurer to be equitably entitled
thereto by reason of having incurred funeral or
other expenses incident to the last illness or,
death of the person insured;
(g) A provision that the insurer will issue to the
policyholder for delivery to each person
insured a statement as to the insurance
protection to which he is entitled, to whom the
insurance benefits are payable, and the rights
set forth in paragraphs (h), (i) and (j) following;
(h) A provision that if the insurance, or any
portion of it, on a person covered under the
policy ceases because of termination of
employment or of membership in the class or
classes eligible for coverage under the policy,
such person shall be entitled to have issued to
him by the insurer, without evidence of
insurability, an individual policy of life
insurance without disability or other
supplementary benefits, provided application
for the individual policy and payment of the first
premium to the insurer shall be made within
thirty (30) days after such termination, and
provided further that:
(1) The individual policy shall be on any one of
the forms, except term insurance, then
customarily issued by the insurer at the age
and for an amount not in excess of the
coverage under the group policy; and
(2) The premium on the individual policy shall
be at the insurer’s then customary rate
applicable to the form and amount of the
individual policy, to the class of risk to which
such person then belongs, and to his age
attained on the effective date of the individual
policy.
(i) A provision that if the group policy
terminates or is amended so as to terminate
the insurance of any class of insured persons,
every person insured thereunder at the date of
such termination whose insurance terminates
and who has been so insured for five (5) years
prior to such termination date shall be entitled
to have issued to him by the insurer an
individual policy of life insurance subject to the
same limitations as set forth in paragraph (h),
except that the group policy may provide that
the amount of such individual policy shall not
exceed the amount of the person’s life
insurance protection ceasing;
(j) A provision that if a person insured under the
group policy dies during the thirty (30)-day
period within which he would have been
entitled to an individual policy issued to him in
accordance with paragraphs (h) and (i) above
and before such individual policy shall have
become effective, the amount of life insurance
which he would have been entitled to have
issued to him as an individual policy shall be
payable as a claim under the group policy
whether or not application for the individual
policy or the payment of the first premium has
been made;
(k) In the case of a policy issued to a creditor
to insure debtors of such creditor, a provision
that the insurer will furnish to the policyholder
for delivery to each debtor insured under the
policy a form which will contain a statement
that the life of the debtor is insured under the
policy and that any death benefit paid
thereunder by reason of his death shall be
applied to reduce or extinguish indebtedness.
The provisions of paragraphs (f) to (j) shall not
apply to policies issued to a creditor to insure
his debtors. If a group life policy is on a plan of
insurance other than term, it shall contain a
non-forfeiture provision or provisions which in
the opinion of the Commissioner is or are
equitable to the insured or the
policyholder: Provided, That nothing herein
contained shall be so construed as to require
group life policies to contain the same non-
forfeiture provisions as are required of
individual life policies.
Section 235. The term industrial life
insurance as used in this Code shall mean that
form of life insurance under which the
premiums are payable either monthly or
oftener, if the face amount of insurance
provided in any policy is not more than five
hundred times that of the current statutory
minimum daily wage in the City of Manila, and
if the words industrial policy are printed upon
the policy as part of the descriptive matter.
An industrial life policy shall not lapse for
nonpayment of premium if such nonpayment
was due to the failure of the company to send
its representative or agent to the insured at the
residence of the insured or at some other place
indicated by him for the purpose of collecting
such premium: Provided, That the provisions
of this paragraph shall not apply when the
premium on the policy remains unpaid for a
period of three (3) months or twelve (12) weeks
after the grace period has expired.
Section 236. In the case of industrial life
insurance, the policy shall contain in substance
the following provisions:
(a) A provision that the insured is entitled to a
grace period of four (4) weeks within which the
payment of any premium after the first may be
made, except that where premiums are
payable monthly, the period of grace shall be
either one (1) month or thirty (30) days; and
that during the period of grace, the policy shall
continue in full force, but if during such grace
period the policy becomes a claim, then any
overdue and unpaid premiums may be
deducted from any amount payable under the
policy in settlement;
(b) A provision that the policy shall be
incontestable after it has been in force during
the lifetime of the insured for a specified period,
not more than two (2) years from its date of
issue, except for nonpayment of premiums and
except for violation of the conditions of the
policy relating to naval or military service, or
services auxiliary thereto, and except as to
provisions relating to benefits in the event of
disability as defined in the policy, and those
granting additional insurance specifically
against death by accident or by accidental
means, or to additional insurance against loss
of, or loss of use of, specific members of the
body;
(c) A provision that the policy shall constitute
the entire contract between the parties, or if a
copy of the application is endorsed upon and
attached to the policy when issued, a provision
that the policy and the application therefor shall
constitute the entire contract between the
parties, and in the latter case, a provision that
all statements made by the insured shall, in the
absence of fraud, be deemed representations
and not warranties;
(d) A provision that if the age of the person
insured, or the age of any person, considered
in determining the premium, or the benefits
accruing under the policy, has been misstated,
any amount payable or benefit accruing under
the policy shall be such as the premium paid
would have purchased at the correct age;
(e) A provision that if the policy is a
participating policy, the company shall
periodically ascertain and apportion any
divisible surplus accruing on the policy under
the conditions specified therein;
(f) A provision that in the event of default in
premium payments after three (3) full years’
premiums have been paid, the policy shall be
converted into a stipulated form of insurance,
and that in the event of default in premium
payments after five (5) full years’ premiums
have been paid, a specified cash surrender
value shall be available, in lieu of the stipulated
form of insurance, at the option of the
policyholder. The net value of such stipulated
form of insurance and the amount of such cash
value shall not be less than the reserve on the
policy and dividend additions thereto, if any, at
the end of the last completed policy year for
which premiums shall have been paid (the
policy to specify the mortality table, rate of
interest and method of valuation adopted to
compute such reserve), exclusive of any
reserve on disability benefits and accidental
death benefits, less an amount not to exceed
two and one-half percent (2½%) of the
maximum amount insured by the policy and
dividend additions thereto, if any, when the
issue age is under ten (10) years, and less an
amount not to exceed two and one-half percent
(2½%) of the current amount insured by the
policy and dividend additions thereto, if any, if
the issue age is ten (10) years or older, and
less any existing indebtedness to the company
on or secured by the policy;
(g) A provision that the policy may be
surrendered to the company at its home office
within a period of not less than sixty (60) days
after the due date of a premium in default for
the specified cash value: Provided, That the
insurer may defer payment for not more than
six (6) months after the application therefor is
made;
(h) A table that shows in figures the
nonforfeiture benefits available under the
policy every year upon default in payment of
premiums during at least the first twenty (20)
years of the policy, such table to begin with the
year in which such values become available,
and a provision that the company will furnish
upon request an extension of such table
beyond the year shown in the policy;
(i) A provision that specifies which one of the
stipulated forms of insurance provided for
under the provision of paragraph (f) of this
section shall take effect in the event of the
insured’s failure, within sixty (60) days from the
due date of the premium in default, to notify the
insurer in writing as to which one of such forms
he has selected;
(j) A provision that the policy may be reinstated
at any time within two (2) years from the due
date of the premium in default unless the cash
surrender value has been paid or the period of
extended term insurance expired, upon
production of evidence of insurability
satisfactory to the company and payment of
arrears of premiums with interest at a rate not
exceeding six percent (6%) per annum payable
annually;
(k) A provision that when a policy shall become
a claim by death of the insured, settlement
shall be made upon receipt of due proof of
death, or not later than two (2) months after
receipt of such proof;
(l) A title on the face and on the back of the
policy correctly describing its form;
(m) A space on the front or the back of the
policy for the name of the beneficiary
designated by the insured with a reservation of
the insured’s right to designate or change the
beneficiary after the issuance of the policy. The
policy may also provide that no designation or
change of beneficiary shall be binding on the
insurer until endorsed on the policy by the
insurer, and that the insurer may refuse to
endorse the name of any proposed beneficiary
who does not appear to the insurer to have an
insurable interest in the life of the insured. Such
policy may also contain a provision that if the
beneficiary designated in the policy does not
surrender the policy with due proof of death
within the period stated in the policy, which
shall not be less than thirty (30) days after the
death of the insured, or if the beneficiary is the
estate of the insured, or is a minor, or dies
before the insured, or is not legally competent
to give valid release, then the insurer may
make any payment thereunder to the executor
or administrator of the insured, or to any of the
insured’s relatives by blood or legal adoption or
connections by marriage or to any person
appearing to the insurer to be equitably entitled
thereto by reason of having incurred expense
for the maintenance, medical attention or burial
of the insured; and
(n) A provision that when an industrial life
insurance policy is issued providing for
accidental or health benefits, or both, in
addition to life insurance, the foregoing
provisions shall apply only to the life insurance
portion of the policy.
Any of the foregoing provisions or portions
thereof not applicable to nonparticipating or
term policies shall to that extent not be
incorporated therein. The foregoing provisions
shall not apply to policies issued or granted
pursuant to the nonforfeiture provisions
prescribed in provisions of paragraphs (f) and
(i) of this section, nor shall provisions of
paragraphs (f), (g), (h), and (i) hereof be
required in term insurance of twenty (20) years
or less but such term policies shall specify the
mortality table, rate of interest, and method of
computing reserves.
Section 237. No policy of industrial life
insurance shall be issued or delivered in the
Philippines if it contains any of the following
provisions:
(a) A provision that gives the insurer the right
to declare the policy void because the insured
has had any disease or ailment, whether
specified or not, or because the insured has
received institutional, hospital, medical or
surgical treatment or attention, except a
provision which gives the insurer the right to
declare the policy void if the insured has, within
two (2) years prior to the issuance of the policy,
received institutional, hospital, medical or
surgical treatment or attention and if the
insured or the claimant under the policy fails to
show that the condition occasioning such
treatment or attention was not of a serious
nature or was not material to the risk;
(b) A provision that gives the insurer the right
to declare the policy void because the insured
has been rejected for insurance, unless such
right be conditioned upon a showing by the
insurer that knowledge of such rejection would
have led to a refusal by the insurer to make
such contract;
(c) A provision that allows the company to pay
the proceeds of the policy at the death of the
insured to any person other than the named
beneficiary, except in accordance with a
standard provision as specified under the
provisions of paragraph (m) of the preceding
section;
(d) A provision that limits the time within which
any action at law or in equity may be
commenced to less than six (6) years after the
cause of action shall accrue; and
(e) A provision that specifies any mode of
settlement at maturity of less value than the
amount insured by the policy plus dividend
additions, if any, less any indebtedness to the
company on the policy and less any premium
that may by the terms of the policy be
deducted, payments to be made in accordance
with the terms of the policy.
Nothing contained in this section nor in the
provision of paragraph (b) of the preceding
section, relating to incontestability, shall be
construed as prohibiting the life insurance
company from placing in its industrial life
policies provisions limiting its liability with
respect to:
(1) Death resulting from aviation other than as
a fare-paying passenger on a regularly
scheduled route between definitely established
airports; and
(2) Military or naval service: Provided, That if
the liability of the company is limited as herein
provided, such liability shall in no event be fixed
at an amount less than the reserve on the
policy (excluding the reserve for any additional
benefits in the event of death by accident or
accidental means or for benefits in the event of
any type of disability), less any indebtedness
on or secured by such policy; nor shall any
provision of this section apply to any provision
in an industrial life insurance policy for
additional benefits in the event of death by
accident or accidental means.
TITLE 10
VARIABLE CONTRACTS
Section 238. (a) No insurance company
authorized to transact business in the
Philippines shall issue, deliver, sell or use any
variable contract in the Philippines, unless and
until such company shall have satisfied the
Commissioner that its financial and general
condition and its methods of operations,
including the issue and sale of variable
contracts, are not and will not be hazardous to
the public or to its policy and contract owners.
No foreign insurance company shall be
authorized to issue, deliver or sell any variable
contract in the Philippines, unless it is likewise
authorized to do so by the laws of its domicile.
(b) The term variable contract shall mean any
policy or contract on either a group or on an
individual basis issued by an insurance
company providing for benefits or other
contractual payments or values thereunder to
vary so as to reflect investment results of any
segregated portfolio of investments or of a
designated separate account in which amounts
received in connection with such contracts
shall have been placed and accounted for
separately and apart from other investments
and accounts. This contract may also provide
benefits or values incidental thereto payable in
fixed or variable amounts, or both. It shall not
be deemed to be a security or securities as
defined in The Securities Act, as amended, or
in the Investment Company Act, as amended,
nor subject to regulations under said Acts.
(c) In determining the qualifications of a
company requesting authority to issue, deliver,
sell or use variable contracts, the
Commissioner shall always consider the
following:
(1) The history, financial and general condition
of the company: Provided, That such
company, if a foreign company, must have
deposited with the Commissioner for the
benefit and security of its variable contract
owners in the Philippines, securities
satisfactory to the Commissioner consisting of
bonds of the Government of the Philippines or
its instrumentalities with an actual market value
of Two million pesos (P2,000,000.00);
(2) The character, responsibility and fitness of
the officers and directors of the company; and
(3) The law and regulation under which the
company is authorized in the state of domicile
to issue such contracts.
(d) If after notice and hearing, the
Commissioner shall find that the company is
qualified to issue, deliver, sell or use variable
contracts in accordance with this Code and the
regulations and rules issued thereunder, the
corresponding order of authorization shall be
issued. Any decision or order denying authority
to issue, deliver, sell or use variable contracts
shall clearly and distinctly state the reasons
and grounds on which it is based.
Section 239. Any insurance company issuing
variable contracts pursuant to this Code may in
its discretion issue contracts providing a
combination of fixed amount and variable
amount of benefits and for option lump-sum
payment of benefits.
Section 240. Every variable contract form
delivered or issued for delivery in the
Philippines, and every certified form
evidencing variable benefits issued pursuant to
any such contract on a group basis, and the
application, rider and endorsement forms
applicable thereto and used in connection
therewith, shall be subject to the prior approval
of the Commissioner.
Section 241. Illustration of benefits payable
under any variable contract shall not include or
involve projections of past investment
experience into the future and shall conform
with the rules and regulations promulgated by
the Commissioner.
Section 242. Variable contracts may be issued
on the industrial life basis, provided that the
pertinent provisions of this Code and of the
rules and regulations of the Commissioner
governing variable contracts are complied with
in connection with such contracts.
Section 243. Every life insurance company
authorized under the provisions of this Code to
issue, deliver, sell or use variable contracts
shall, in connection with the same, establish
one or more separate accounts to be known as
separate variable accounts. All amounts
received by the company in connection with
any such contracts which are required by the
terms thereof, to be allocated or applied to one
or more designated separate variable accounts
shall be placed in such designated account or
accounts. The assets and liabilities of each
such separate variable account shall at all
times be clearly identifiable and distinguishable
from the assets and liabilities in all other
accounts of the company. Notwithstanding any
provision of law to the contrary, the assets held
in any such separate variable account shall not
be chargeable with liabilities arising out of any
other business the company may conduct but
shall be held and applied exclusively for the
benefit of the owners or beneficiaries of the
variable contracts applicable thereto. In the
event of the insolvency of the company, the
assets of each such separate variable account
shall be applied to the contractual claims of the
owners or beneficiaries of the variable
contracts applicable thereto. Except as
otherwise specifically provided by the contract,
no sale, exchange or other transfer of assets
may be made by a company, between any of
its separate accounts or between any other
investment account and one or more of its
separate accounts, unless in the case of a
transfer into a separate account, such transfer
is made solely to establish the account or to
support the operation of the contracts with
respect to the separate account to which the
transfer is made, or in case of a transfer from a
separate account, such transfer would not
cause the remaining assets of the account to
become less than the reserves and other
contract liabilities with respect to such separate
account. Such transfer, whether into or from a
separate account, shall be made by a transfer
of cash, or by a transfer of securities having a
valuation which could be readily determined in
the market place: Provided, That such transfer
of securities is approved by the Commissioner.
The Commissioner may authorize other
transfers among such accounts, if, in his
opinion, such transfers would not be
inequitable. All amounts and assets allocated
to any such separate variable account shall be
owned by the company and with respect to the
same the company shall not be nor hold itself
out to be a trustee.
Section 244. Any insurance company which
has established one or more separate variable
accounts pursuant to the preceding section
may invest and reinvest all or any part of the
assets allocated to any such account in the
securities and investments authorized by
Sections 204, 206, 207 and 208 for any of the
funds of an insurance company in such amount
or amounts as may be approved by the
Commissioner. In addition thereto, such
company may also invest in common stocks or
other equities which are listed on or admitted
to trading in a securities exchange located in
the Philippines, or which are publicly held and
traded in the over-the-counter market as
defined by the Commissioner and as to which
market quotations have been
available: Provided, however, That no such
company shall invest in excess of ten percent
(10%) of the assets of any such separate
variable accounts in any one corporation
issuing such common stock. The assets and
investments of such separate variable
accounts shall not be taken into account in
applying the quantitative investment limitations
applicable to other investments of the
company. In the purchase of common capital
stock or other equities, the insurer shall
designate to the broker, or to the seller if the
purchase is not made through a broker, the
specific variable account for which the
investment is made.
Section 245. Assets allocated to any separate
variable account shall be valued at their market
value on the date of any valuation, or if there is
no readily available market value then in
accordance with the terms of the variable
contract applicable to such assets, or if there
are no such contract terms then in such
manner as may be prescribed by the rules and
regulations of the Commissioner.
Section 246. The reserve liability for variable
contracts shall be established in accordance
with actuarial procedures that recognize the
variable nature of the benefits provided, and
shall be approved by the Commissioner.
TITLE 11
CLAIMS SETTLEMENT
Section 247. (a) No insurance company doing
business in the Philippines shall refuse, without
just cause, to pay or settle claims arising under
coverages provided by its policies, nor shall
any such company engage in unfair claim
settlement practices. Any of the following acts
by an insurance company, if committed without
just cause and performed with such frequency
as to indicate a general business practice, shall
constitute unfair claim settlement practices:
(1) Knowingly misrepresenting to claimants
pertinent facts or policy provisions relating to
coverage at issue;
(2) Failing to acknowledge with reasonable
promptness pertinent communications with
respect to claims arising under its policies;
(3) Failing to adopt and implement reasonable
standards for the prompt investigation of
claims arising under its policies;
(4) Not attempting in good faith to effectuate
prompt, fair and equitable settlement of claims
submitted in which liability has become
reasonably clear; or
(5) Compelling policyholders to institute suits to
recover amounts due under its policies by
offering without justifiable reason substantially
less than the amounts ultimately recovered in
suits brought by them.
(b) Evidence as to numbers and types of valid
and justifiable complaints to the Commissioner
against an insurance company, and the
Commissioner’s complaint experience with
other insurance companies writing similar lines
of insurance shall be admissible in evidence in
an administrative or judicial proceeding
brought under this section.
(c) If it is found, after notice and an opportunity
to be heard, that an insurance company has
violated this section, each instance of
noncompliance with paragraph (a) may be
treated as a separate violation of this section
and shall be considered sufficient cause for the
suspension or revocation of the company’s
certificate of authority.
Section 248. The proceeds of a life insurance
policy shall be paid immediately upon maturity
of the policy, unless such proceeds are made
payable in installments or as an annuity, in
which case the installments, or annuities shall
be paid as they become due: Provided,
however, That in the case of a policy maturing
by the death of the insured, the proceeds
thereof shall be paid within sixty (60) days after
presentation of the claim and filing of the proof
of death of the insured. Refusal or failure to pay
the claim within the time prescribed herein will
entitle the beneficiary to collect interest on the
proceeds of the policy for the duration of the
delay at the rate of twice the ceiling prescribed
by the Monetary Board, unless such failure or
refusal to pay is based on the ground that the
claim is fraudulent.
The proceeds of the policy maturing by the
death of the insured payable to the beneficiary
shall include the discounted value of all
premiums paid in advance of their due dates,
but are not due and payable at maturity.
Section 249. The amount of any loss or
damage for which an insurer may be liable,
under any policy other than life insurance
policy, shall be paid within thirty (30) days after
proof of loss is received by the insurer and
ascertainment of the loss or damage is made
either by agreement between the insured and
the insurer or by arbitration; but if such
ascertainment is not had or made within sixty
(60) days after such receipt by the insurer of
the proof of loss, then the loss or damage shall
be paid within ninety (90) days after such
receipt. Refusal or failure to pay the loss or
damage within the time prescribed herein will
entitle the assured to collect interest on the
proceeds of the policy for the duration of the
delay at the rate of twice the ceiling prescribed
by the Monetary Board, unless such failure or
refusal to pay is based on the ground that the
claim is fraudulent.
Section 250. In case of any litigation for the
enforcement of any policy or contract of
insurance, it shall be the duty of the
Commissioner or the Court, as the case may
be, to make a finding as to whether the
payment of the claim of the insured has been
unreasonably denied or withheld; and in the
affirmative case, the insurance company shall
be adjudged to pay damages which shall
consist of attorney’s fees and other expenses
incurred by the insured person by reason of
such unreasonable denial or withholding of
payment plus interest of twice the ceiling
prescribed by the Monetary Board of the
amount of the claim due the insured, from the
date following the time prescribed in Section
248 or in Section 249, as the case may be, until
the claim is fully satisfied: Provided, That
failure to pay any such claim within the time
prescribed in said sections shall be
considered prima facie evidence of
unreasonable delay in payment.
Section 251. It is unlawful to:
(a) Present or cause to be presented any
fraudulent claim for the payment of a loss
under a contract of insurance; and
(b) Fraudulently prepare, make or subscribe
any writing with intent to present or use the
same, or to allow it to be presented in support
of any such claim. Any person who violates this
section shall be punished by a fine not
exceeding twice the amount claimed or
imprisonment of two (2) years, or both, at the
discretion of the court.
TITLE 12
EXAMINATION OF COMPANIES
Section 252. The Commissioner shall require
every insurance company doing business in
the Philippines to keep its books, records,
accounts and vouchers in such manner that he
or his authorized representatives may readily
verify its annual statements and ascertain
whether the company is solvent and has
complied with the provisions of this Code or the
circulars, instructions, rulings or decisions of
the Commissioner.
Section 253. The Commissioner shall at least
once a year and whenever he considers the
public interest so demands, cause an
examination to be made into the affairs,
financial condition and method of business of
every insurance company authorized to
transact business in the Philippines and of any
other person, firm or corporation managing the
affairs and/or property of such insurance
company. Such company, as well as such
managing person, firm or corporation, shall
submit to the examiner all such books, papers
and securities as he may require and such
examiner shall also have the power to examine
the officers of such company under oath
touching its business and financial condition,
and the authority to transact business in the
Philippines of any such company shall be
suspended by the Commissioner if such
examination is refused and such company
shall not thereafter be allowed to transact
further business in the Philippines until it has
fully complied with the provisions of this
section.
Government-owned or -controlled corporations
or entities engaged in social or private
insurance shall similarly be subject to such
examination by the Commissioner unless their
respective charters otherwise provide.
TITLE 13
SUSPENSION OR REVOCATION OF
AUTHORITY
Section 254. If the Commissioner is of the
opinion upon examination of other evidence
that any domestic or foreign insurance
company is in an unsound condition, or that it
has failed to comply with the provisions of law
or regulations obligatory upon it, or that its
condition or method of business is such as to
render its proceedings hazardous to the public
or to its policyholders, or that its net worth
requirement, in the case of a domestic stock
company, or its available cash assets, in the
case of a domestic mutual company, or its
security deposits, in the case of a foreign
company, is impaired or deficient, or that the
margin of solvency required of such company
is deficient, the Commissioner is authorized to
suspend or revoke all certificates of authority
granted to such insurance company, its officers
and agents, and no new business shall
thereafter be done by such company or for
such company by its agent in the Philippines
while such suspension, revocation or disability
continues or until its authority to do business is
restored by the Commissioner. Before
restoring such authority, the Commissioner
shall require the company concerned to submit
to him a business plan showing the company’s
estimated receipts and disbursements, as well
as the basis therefor, for the next succeeding
three (3) years.
TITLE 14
APPOINTMENT OF CONSERVATOR
Section 255. If at any time before, or after, the
suspension or revocation of the certificate of
authority of an insurance company as provided
in the preceding title, the Commissioner finds
that such company is in a state of continuing
inability or unwillingness to maintain a
condition of solvency or liquidity deemed
adequate to protect the interest of
policyholders and creditors, he may appoint a
conservator to take charge of the assets,
liabilities, and the management of such
company, collect all moneys and debts due to
said company and exercise all powers
necessary to preserve the assets of said
company, reorganize the management thereof,
and restore its viability. The said conservator
shall have the power to overrule or revoke the
actions of the previous management and board
of directors of the said company, any provision
of law, or of the articles of incorporation or
bylaws of the company, to the contrary
notwithstanding, and such other powers as the
Commissioner shall deem necessary.
The conservator may be another insurance
company doing business in the Philippines,
any officer or officers of such company, or any
other competent and qualified person, firm or
corporation. The remuneration of the
conservator and other expenses attendant to
the conservation shall be borne by the
insurance company concerned.
The conservator shall not be subject to any
action, claim or demand by, or liability to, any
person in respect of anything done or omitted
to be done in good faith in the exercise, or in
connection with the exercise, of the powers
conferred on the conservator.
The conservator appointed shall report and be
responsible to the Commissioner until such
time as the Commissioner is satisfied that the
insurance company can continue to operate on
its own and the conservatorship shall likewise
be terminated should the Commissioner, on
the basis of the report of the conservator or of
his own findings, determine that the
continuance in business of the insurance
company would be hazardous to policyholders
and creditors, in which case the provisions of
Title 15 shall apply.
No insurance company, life or non-life, or any
professional reinsurer, ordered to be liquidated
by the Commissioner under the provisions
hereunder may be rehabilitated or authorized
to transact anew, insurance or reinsurance
business, as the case may be.
TITLE 15
PROCEEDINGS UPON INSOLVENCY
Section 256. Whenever, upon examination or
other evidence, it shall be disclosed that the
condition of any insurance company doing
business in the Philippines is one of
insolvency, or that its continuance in business
would be hazardous to its policyholders and
creditors, the Commissioner shall forthwith
order the company to cease and desist from
transacting business in the Philippines and
shall designate a receiver to immediately take
charge of its assets and liabilities, as
expeditiously as possible collect and gather all
the assets and administer the same for the
benefit of its policyholders and creditors, and
exercise all the powers necessary for these
purposes including, but not limited to, bringing
suits and foreclosing mortgages in the name of
the insurance company.
The Commissioner shall thereupon determine
within ninety (90) days whether the insurance
company may be reorganized or otherwise
placed in such condition so that it may be
permitted to resume business with safety to its
policyholders and creditors and shall prescribe
the conditions under which such resumption of
business shall take place as well as the time
for fulfillment of such conditions. In such case,
the expenses and fees in the collection and
administration of the insurance company shall
be determined by the Commissioner and shall
be paid out of the assets of such company.
If the Commissioner shall determine and
confirm within the said period that the
insurance company is insolvent, as defined
hereunder, or cannot resume business with
safety to its policyholders and creditors, he
shall, if the public interest requires, order its
liquidation, indicate the manner of its
liquidation and approve a liquidation plan and
implement it immediately. The Commissioner
shall designate a competent and qualified
person as liquidator who shall take over the
functions of the receiver previously designated
and, with all convenient speed, reinsure all its
outstanding policies, convert the assets of the
insurance company to cash, or sell, assign or
otherwise dispose of the same to the
policyholders, creditors and other parties for
the purpose of settling the liabilities or paying
the debts of such company and he may, in the
name of the company, institute such actions as
may be necessary in the appropriate court to
collect and recover accounts and assets of the
insurance company, and to do such other acts
as may be necessary to complete the
liquidation as ordered by the Commissioner.
The provisions of any law to the contrary
notwithstanding, the actions of the
Commissioner under this section shall be final
and executory, and can be set aside by the
court upon petition by the company and only if
there is convincing proof that the action is
plainly arbitrary and made in bad faith. The
Commissioner, through the Solicitor General,
shall then file the corresponding answer
reciting the proceeding taken and praying the
assistance of the court in the liquidation of the
company. No restraining order or injunction
shall be issued by the court enjoining the
Commissioner from implementing his actions
under this section, unless there is convincing
proof that the action of the Commissioner is
plainly arbitrary and made in bad faith and the
petitioner or plaintiff files with the Clerk or
Judge of the Court in which the action is
pending a bond executed in favor of the
Commissioner in an amount to be fixed by the
court. The restraining order or injunction shall
be refused or, if granted, shall be dissolved
upon filing by the Commissioner, if he so
desires, of a bond in an amount twice the
amount of the bond of the petitioner or plaintiff
conditioned that it will pay the damages which
the petition or plaintiff may suffer by the refusal
or the dissolution of the injunction. The
provisions of Rule 58 of the New Rules of Court
insofar as they are applicable shall govern the
issuance and dissolution of the restraining
order or injunction contemplated in this section.
All proceedings under this title shall be given
preference in the courts. The Commissioner
shall not be required to pay any fee to any
public officer for filing, recording, or in any
manner authenticating any paper or instrument
relating to the proceedings.
As used in this title, the term Insolvency shall
mean the inability of an insurance company to
pay its lawful obligations as they fall due in the
usual and ordinary course of business as may
be shown by its failure to maintain the solvency
requirements under Section 200 of this Code.
Section 257. The receiver or the liquidator, as
the case may be, designated under the
provisions of this title, shall not be subject to
any action, claim or demand by, or liability to,
any person in respect of anything done or
omitted to be done in good faith in the exercise,
or in connection with the exercise, of the
powers conferred on such receiver or
liquidator.
TITLE 16
CONSOLIDATION AND MERGER OF
INSURANCE COMPANIES
Section 258. Upon prior notice to the
Commissioner, two (2) or more domestic
insurance companies, acting through their
respective boards of directors, may negotiate
to merge into a single corporation which shall
be one of the constituent corporations, or
consolidate into a single corporation which
shall be a new corporation to be formed by the
consolidation. A common agreement of the
proposed merger or consolidation shall be
drawn up for submission to the stockholders or
members of the constituent companies for
adoption and approval in accordance with the
provisions of the respective bylaws of the
constituent companies and all existing laws
that may be pertinent.
Section 259. Such agreement shall include,
aside from the proposed merger or
consolidation, provisions relative to the manner
of transfer of assets to and assumption of
liabilities by the absorbing or acquiring
company from the absorbed or dissolved
company or companies; the proposed articles
of merger or consolidation and bylaws of the
surviving or acquiring company; the corporate
name to be adopted which should not be that
of any other existing company transacting
similar business or one so similar as to be
calculated to mislead the public; the rights of
the stockholders or members of the absorbed
or dissolved companies; date of effectivity of
the merger or consolidation; and such
particulars as may be necessary to explain and
make manifest the objects and purposes of the
absorbing or acquiring company.
Section 260. Upon execution of such
agreement to merge or consolidate by and
between or among the boards of directors of
the constituent companies, notice thereof shall
be mailed immediately to their policyholders
and creditors. The company or companies to
be absorbed or dissolved shall discharge all its
accrued liabilities; otherwise, such liabilities
shall, with the consent of its creditors, be
transferred to and assumed by the absorbing
or acquiring company, or such liabilities be
reinsured by the latter. In the case of such
policies as are subject to cancellation by the
company or companies to be absorbed or
dissolved, same may be cancelled pursuant to
the terms thereof in lieu of such transfer,
assumption, or reinsurance.
Section 261. Upon approval or adoption in the
meetings of the stockholders or members
called for the purpose in each of the constituent
companies of the agreement to merge or
consolidate, all stockholders or members
dissenting or objecting to the merger or
consolidation shall be paid the value of their
shares by the company concerned in
accordance with the bylaws thereof.
Section 262. Upon approval or adoption of the
agreement to merge or consolidate by the
stockholders or members of the constituent
companies, the corresponding articles of
merger or of consolidation shall be duly
executed by the presidents and attested by the
corporate secretaries and shall bear the
corporate seals of the merging or consolidating
companies setting forth:
(a) The plan of merger or the plan of
consolidation;
(b) As to each corporation, the number of
shares outstanding, or in case of mutual
corporations, the number of members; and
(c) As to each corporation, the number of
shares or members voted for and against such
plan, respectively. Thereafter, a certified copy
of such articles of merger or consolidation,
together with a certificate of approval or
adoption by the stockholders or members of
such articles of merger or consolidation,
verified by affidavits of such officers and under
the seal of the constituent companies, shall be
submitted to the Commissioner, together with
such other papers or documents which the
Commissioner may require, for his
consideration.
Section 263. The articles of merger or of
consolidation, signed and verified as
hereinabove required, shall be filed with the
Securities and Exchange Commission for its
examination and approval.
Section 264. Upon receipt from the Securities
and Exchange Commission of the certificate of
merger or of consolidation, the constituent
companies shall surrender to the
Commissioner their respective certificates of
authority to transact insurance business. The
absorbing or surviving company in case of
merger, or the newly formed company in case
of consolidation, shall immediately file with the
Commissioner the corresponding application
for issuance of a new certificate of authority to
transact insurance business, together with a
certified copy of the certificate of merger or of
consolidation, and of the certificate of increase
of stocks, if there is any, issued by the
Securities and Exchange Commission.
Section 265. Nothing in this title shall be
construed to enlarge the powers of the
absorbing or surviving company in case of
merger, or the newly formed company in case
of consolidation, except those conferred by the
certificate of merger or of consolidation and the
articles of merger or of consolidation, or the
amended articles of incorporation, as
registered with the Securities and Exchange
Commission.
Section 266. No director, officer, or stockholder
of any such constituent companies shall
receive any fee, commission, compensation, or
other valuable consideration whatsoever,
directly or indirectly, or in any manner aiding,
promoting or assisting in such merger or
consolidation.
Section 267. The merger or consolidation of
companies under this Code shall be subject to
the provisions of the Corporation Code, and, in
those cases specified in Republic Act No.
5455, as amended, be further subject to the
provisions of said law.
TITLE 17
MUTUALIZATION OF STOCK LIFE
INSURANCE COMPANIES
Section 268. Any domestic stock life insurance
company doing business in the Philippines
may convert itself into an incorporated mutual
life insurer. To that end it may provide and
carry out a plan for the acquisition of the
outstanding shares of its capital stock for the
benefit of its policyholders, or any class or
classes of its policyholders, by complying with
the requirements of this chapter.
Section 269. Such plan shall include
appropriate proceedings for amending the
insurer’s articles of incorporation to give effect
to the acquisition, by said insurer, for the
benefit of its policyholders or any class or
classes thereof, of the outstanding shares of its
capital stock and the conversion of the insurer
from a stock corporation into a nonstock
corporation for the benefit of its members. The
members of such nonstock corporation shall
be the policyholders from time to time of the
class or classes for whose benefit the stock of
the insurer was acquired, and the policyholders
of such other class or classes as may be
specified in such corporation’s articles of
incorporation as they may be amended from
time to time. Such plan shall be:
(a) Adopted by a vote of a majority of the
directors;
(b) Approved by the vote of the holders of at
least a majority of the outstanding shares at a
special meeting of shareholders called for that
purpose, or by the written consent of such
shareholders;
(c) Submitted to the Commissioner and
approved by him in writing;
(d) Approved by a majority vote of all the
policyholders of the class or classes for whose
benefit the stock is to be acquired voting at an
election by the policyholders called for that
purpose, subject to the provisions of Section
271.
terms policyholder or policyholders as used in
this chapter shall be deemed to mean the
person or persons insured under an individual
policy of life insurance, or of health and
accident insurance, or of any combination of
life, health and accident insurance. They shall
also include the person or persons to whom
any annuity or pure endowment is presently or
prospectively payable by the terms of an
individual annuity or pure endowment contract,
except where the policy or contract declares
some other person to be the owner or holder
thereof, in which case such other person shall
be deemed policyholder. In any case where a
policy or contract names two or more persons
as joint insured, payees, owners or holders
thereof, the persons so named shall be
deemed collectively to be one (1) policyholder
for the purpose of this chapter. In any case
where a policy or contract shall have been
assigned by assignment absolute on its face to
an assignee other than the insurer, and such
assignment shall have been filed at the
principal office of the insurer at least thirty (30)
days prior to the date of any election or meeting
referred to in this chapter, then such assignee
shall be deemed at such election or meeting to
be the policyholder. For the purpose of this
chapter
terms policyholder and policyholders include
the employer to whom, or a president,
secretary or other executive officer of any
corporation or association to which a master
group policy has been issued, but exclude the
holders of certificates or policies issued under
or in connection with a master group policy.
Beneficiaries under unmatured contracts shall
not as such be deemed to be policyholders;
and
(e) Filed with the Commissioner after having
been approved as provided in this section.
Section 270. The Commissioner shall examine
the plan submitted to him under the provisions
of subparagraph (c) of Section 269. He shall
not approve such plan unless in his opinion the
rights and interests of the insurer, its
policyholders and shareholders are protected
nor unless he is satisfied that the plan will be
fair and equitable in its operation.
Section 271. The election prescribed by
subparagraph (d) of Section 269 shall be called
The by the board of directors or the president, and
every policyholder of the class or classes for
whose benefit the stock is to be acquired,
whose insurance shall have been in force for at
least one (1) year prior to such election shall
have one vote, regardless of the number of
policies or amount of insurance he holds, and
regardless of whether such policies are
policies of life insurance or policies of health
and accident insurance or annuity contracts.
Notice of such election shall be given to
policyholders entitled to vote by mail from the
principal office of such insurer at least thirty
(30) days prior to the date set for such election,
in a sealed envelope, postage prepaid,
addressed to each such policyholder at his last
known address.
Voting shall be by one of the following
methods:
(a) At a meeting of such policyholders, held
pursuant to such notice, by ballot in person or
by proxy.
(b) If not by the method described in the
preceding subparagraph, then by mail
pursuant to a procedure and on forms to be
prescribed by such plan.
the
Such election shall be conducted under the
direction and supervision of three (3) impartial
and disinterested inspectors appointed by the
insurer and approved by the Commissioner. In
case any person appointed as inspector fails to
appear at such meeting or fails or refuses to
act at such election, the vacancy, if occurring
in advance of the convening of the meeting or
in advance of the opening of the mail vote, may
be filled in the manner prescribed for the
appointment of inspectors and, if occurring at
the meeting or during the canvass of the mail
vote, may be filled by the person acting as
chairman of said meeting or designated for that
purpose in such plan. The decision, act or
certificate of a majority of the inspectors shall
be effective in all respects as the decision, act
or certificate of all. The inspectors of election
shall determine the number of policyholders,
the voting power of each, the policyholders
represented at the meeting or voting by mail,
the existence of a quorum and the authenticity,
validity and effect of proxies. They shall receive
votes, hear and determine all challenges and
questions in any way arising in connection with
the right to vote, count and tabulate all votes,
determine the result, and do such other acts as
are proper to conduct the vote with fairness to
all policyholders. The inspectors of election
shall, before commencing performance of their
duties, subscribe to and file with the insurer
and with the Commissioner an oath that they,
and each of them, will perform their duties
impartially, in good faith, to the best of their
ability and as expeditiously as is practicable.
On the request of the insurer, the
Commissioner, a policyholder or his proxy, the
inspectors shall make a report in writing of any
challenge or question or matter determined by
them and execute a certificate of any fact found
by them. They shall also certify the result of
such vote to the insurer and to the
Commissioner. Any report or certificate made
by them shall be prima facie evidence of facts
stated therein. All necessary expenses
incurred in connection with such election shall
be paid by the insurer. For the purpose of this
section, a quorum shall consist of five percent
(5%) of the policyholders of such insurer
entitled to vote at such election.
Section 272. In carrying out any such plan, the
insurer may acquire any shares of its own stock
by gift, bequest or purchase. Any shares so
acquired shall, unless as a result of such
acquisition all of the shares of the insurer shall
have been acquired, be acquired in trust for the
policyholders of the class or classes for whose
benefit the plan provides that the stock of the
insurer shall be acquired as hereinafter
provided. Such shares shall be assigned and
transferred on the books of such insurer and
approved by the Commissioner. Such trustees
shall hold such stock in trust until all of the
outstanding shares of capital stock of such
insurer have been acquired, but for not longer
than thirty (30) years with such extensions of
not more than five (5) years each as may be
granted by the Commissioner. Such
extensions may be granted by the
Commissioner if the plan so provides and if in
his opinion the plan of acquisition of all of such
stock can be completed within a reasonable
period. Such trustees shall vote such stock at
all corporate meetings at which stockholders
have the right to vote. When all the outstanding
shares of capital stock of such insurer have
been acquired, all said shares shall be
cancelled, the certificate of amendment of the
insurer’s articles of incorporation giving effect
thereto shall be filed in accordance with the
provisions of the Corporation Code, and the
insurer shall become a nonstock corporation
for the profit of its members and such trust shall
thereupon terminate. Thereafter such
corporation shall be conducted for the mutual
benefit, ratably, of its policyholders of the class
or classes for whose benefit the stock was
acquired and shall have power to issue non-
assessable policies on a reserve basis subject
to all provisions of law applicable to
incorporated life insurers issuing non-
assessable policies on a reserve basis.
Policies so issued may be upon the basis of full
or partial participation therein as agreed
between the insurer and the insured.
Upon the termination of any such voting trust,
either in accordance with its terms or as
hereinabove provided, such plan of
mutualization shall terminate, unless
theretofore completed. Upon such termination,
unless the plan of mutualization provides for
the disposition of the shares acquired by the
insurer under such plan or for the disposition of
the proceeds thereof, the shares held by such
trustees shall be disposed of in accordance
with an order of the court of competent
jurisdiction in the judicial district in which is
located the principal office of such insurer,
made upon a verified petition of the
Commissioner.
Section 273. Any such plan of mutualization
may provide for the creation of a voting trust
under a trust agreement for the holding and
voting by three (3) or more trustees of any
portion or all of the shares of the insurer not
required upon the adoption of such plan. The
voting trustees shall be named in accordance
with such plan or, if no provision is made
therein for the naming of such trustees, then by
the insurer. The voting trust agreement and
voting trustees shall be subject to the approval
of the Commissioner. Any or all of the trustees
under such voting trust agreement may be the
same person or persons as any or all of the
trustees referred to in Section 272. Such voting
trust agreement shall provide that in the event
of acquisition by the insurer of any of the
shares of stock held thereunder in accordance
with the provisions of the plan, such shares so
acquired together with the voting rights thereof
shall be transferred by the trustees named
under the provisions of this section to the
trustees named under the provisions of Section
272. Any voting trust agreement created
pursuant to the provisions of this section may
be made irrevocable for not longer than thirty
(30) years and thereafter until the termination
of the trust provided for in Section 272. The
trust created pursuant to the provisions of this
section shall terminate in any event upon
termination of the trust provided for in Section
272. Upon the termination of the trust created
pursuant to the provisions of this section, any
shares held in such trust shall revert to the
persons entitled thereto by law.
Section 274. Every payment for the acquisition
of any shares of the capital stock of such
insurer, the purchase price of which is not fixed
by such plan, shall be subject to the prior
approval of the Commissioner. Neither such
plan, nor any such payment, may be approved
by the Commissioner unless he finds that the
rights and interests of the insurer, its
policyholders, and shareholders are protected.
Section 275. The trustees referred to in Section
272 shall file with such insurer and with the
Commissioner a verified acceptance of their
appointments and verified declarations that
they will faithfully discharge their duties as
such trustees. All dividends and other sums
received by said trustees on the shares held by
them, after paying the necessary expenses of
executing their trust, shall be immediately
repaid to such insurer for the benefit of all who
are, or may become, policyholders of such
insurance of the class or classes for whose
benefit the stock of such insurer was acquired
and entitled to participate in the profits thereof
and shall be added to and become part of the
assets of such insurer.
Section 276. If, at any time within the period
provided in the plan for the acquisition of the
outstanding shares of stock of the insurer,
ninety percent (90%) thereof has already been
acquired and transferred to the trustees under
the plan, the insurer by a vote of a majority of
the directors may determine to make an offer,
with the permission of the Commissioner and
subject to such requirement as he may specify,
to acquire by purchase all of the shares not
theretofore acquired under the plan, at a
specified price which the insurer considers to
be their fair value as of the date of making such
offer.
If the offer to acquire is permitted by the
Commissioner, the insurer shall make a written
offer by registered mail to each shareholder
whose shares have not theretofore been
acquired under the plan or otherwise, offering
to acquire all his shares at such price if
accepted in writing within thirty (30) days after
the mailing of such offer. Any shareholder
accepting such offer within the time therefor
shall, within sixty (60) days after his
acceptance, transfer to the insurer the
certificates representing such shares and,
upon doing so, shall be paid by the insurer the
amount of such offer for his shares. Any share
so acquired shall be assigned and transferred
to the trustees under the plan and held by them
as shares acquired pursuant to the plan.
Each shareholder who does not accept such
offer to acquire his shares within the time
stated in such offer for acceptance thereof
shall within fifteen (15) days after the expiration
of such offer apply to the Secretary of Finance
for a determination of the fair value of his
shares as of the date of making such offer. The
Secretary of Finance may himself, after due
notice and hearing, determine upon the
evidence received the fair value of the shares
as of the date of making such offer, or appoint
three (3) impartial and disinterested persons to
appraise the fair value of such shares with such
direction as he shall deem proper and
necessary to expedite the proceedings. Upon
completion of the appraisal proceedings, the
appraisers shall file with the Secretary of
Finance their report in writing stating the fair
value of such shares as of the date of the
making of such offer and setting forth their
findings in support of such statement. The
appraisers shall furnish each party to the
proceedings a copy of their appraisal report,
and within ten (10) days after receipt thereof,
any such party may signify his objection, if any,
to the report or move for the approval thereof.
Upon the expiration of the period of ten (10)
days referred to above, the report shall be set
for hearing, after which the Secretary of
Finance shall issue an order adopting,
modifying or rejecting the report, in whole or in
part, or he may receive further evidence or may
recommit it with instructions. Whenever the
Secretary of Finance shall determine in any
manner, as aforesaid, the fair value of such
shares, he may also determine the terms of
payment thereof by the insurer. The expenses
incidental to the proceedings including charges
of the appraisers, if any, shall be paid equally
by the insurer and the shareholder.
The findings of the Secretary of Finance on all
questions of fact raised at the hearing of the
application for determination of the fair value of
such shares shall be conclusive upon all
parties to the proceedings. The order of the
Secretary of Finance determining the fair value
of the shares and the terms of payment thereof
shall have the force and effect of a judgment
which shall be appealable on any question of
law. Such order shall become final and
executory fifteen (15) days after receipt thereof
by the parties to the proceedings.
Upon any such order becoming final and from
which no appeal is pending, or when the time
to appeal therefrom has expired, each
shareholder party to the proceedings shall
transfer his shares to the insurer and surrender
to the said insurer the certificates representing
such shares and the insurer shall make
payment therefor as provided in such order.
Any shares so acquired by the insurer shall be
assigned and transferred to the trustees and
held by them as shares acquired pursuant to
the plan.
Any shareholder who does not apply to the
Secretary of Finance in the manner and within
the time hereinbefore prescribed shall be
deemed to have accepted the offer referred to
above, effective, however, upon the expiration
of the time hereinabove prescribed for making
such application, and such shareholder’s time
for accepting such offer shall, for that purpose
only, be deemed to have been extended
accordingly.
Any offer to acquire shares made pursuant to
this section shall, except as otherwise provided
herein, be irrevocable until all proceedings
upon such offer have been completed or all
shares have otherwise been earlier acquired
by the insurer.
Any shareholder who has expressly or
impliedly accepted the plan or the offer to
acquire his shares not theretofore acquired
under the plan, and any shareholder who has
rejected such plan or such offer and has
applied, as aforesaid, to the Secretary of
Finance for a determination of the fair value of
his shares subsequent to which an agreement
has been reached or a final order issued fixing
such fair value but who fails to surrender his
certificates for cancellation upon payment of
the amount to which he is entitled, may be
compelled to do so by an order of the Secretary
of Finance for that purpose and such order may
provide that upon failure of such shareholder to
surrender such certificates for cancellation,
such order shall stand in lieu of such surrender
and cancellation.
Section 277. Such insurer, after mutualization,
shall be a continuation of the original insurer,
and such mutualization shall not affect such
insurer’s certificate of authority nor existing
suits, rights or contracts except as provided in
said plan for the acquisition of the outstanding
shares of the capital stock of such insurer,
approved as provided in this chapter. Such
insurer, after mutualization, shall exercise all
the rights and powers and shall perform all the
duties conferred or imposed by law upon
insurers writing the classes of insurance
written by it, and to protect rights and contracts
existing prior to mutualization, subject to the
effect of said plan. The board of directors of
such insurer, prior to mutualization, may adopt
amendments to its bylaws to take effect upon
mutualization.
Section 278. (a) An annual meeting of
members shall be held at ten o’clock in the
morning of the fourth Tuesday of March of each
year at the principal office of the insurer, unless
a different time or place is provided in the
bylaws.
(b) Special meetings of the members, for any
purpose or purposes whatsoever, may be
called at any time by the president, or by the
board of directors, or by one or more members
holding not less than one-fifth (1/5) of the
voting power of such insurer, or by such other
officers or persons as the bylaws authorize.
(c) Notice of all meetings of members whether
annual or special shall be given in writing to the
members entitled to vote by the secretary, or
an assistant secretary, or other person
charged with that duty, or if there be no such
officer, or in case of his neglect or refusal, by
any director or member. At the option of the
insurer such notice may be imprinted on
premium notices or receipts or on both.
A notice may be given by such insurer to any
member either personally, or by mail, or other
means of written communication, charges
prepaid, addressed to such member at his
address appearing on the books of the insurer,
or given by him to the insurer for the purpose
of notice. If a member gives no address, notice
shall be deemed to have been given him if sent
by mail or other means of written
communication addressed to the place where
the principal office of the insurer is situated, or
if published at least once in some newspaper
of general circulation in the place in which said
office is located.
Notice of any meeting of members shall be
sent to each member entitled thereto not less
than seven (7) days before such meeting,
unless the bylaws provide otherwise.
Notice of any meeting of members shall specify
the place, the day and the hour of the meeting
and the general nature of the business to be
transacted.
Notice of an annual meeting to be held at the
time and place specified in subparagraph (a) of
this section shall be sufficiently given if
published at least once in each of four (4)
successive weeks in a newspaper of general
circulation in the place in which the principal
office of such insurer is located, and if so
published no other notice of such meeting shall
be required.
(d) The presence in person or by proxy of five
percent (5%) of the members entitled to vote at
any meeting shall constitute a quorum for the
transaction of business, including the
amendment of the articles of incorporation
and/or the bylaws unless otherwise provided
by the bylaws.
(e) Each such member shall have one (1) vote
at any meeting of members regardless of the
number of policies or the amount of insurance
that such member holds and regardless of
whether such policies are policies of life
insurance, or of health and accident insurance,
or both. Any member entitled to vote shall have
the right to do so either in person or by an
agent or agents authorized by a written proxy
executed by such person or his duly authorized
agent and filed with the secretary of such
insurer.
(f) The directors of the insurer in office at the
time the insurer is mutualized as provided in
this chapter shall continue in office until the first
annual meeting of members. At the first annual
meeting of members and at each annual
meeting thereafter, directors shall be elected
by the members for the term or terms
authorized by this chapter.
(g) The articles of incorporation or the bylaws
may provide that the directors may be divided
into two (2) or more classes whose terms of
office shall expire at different times, but no
terms shall continue longer than six (6) years.
In the absence of such provisions, each
director, except members of the board of
directors at the time the insurer is mutualized,
shall be elected for a term of one (1) year. All
directors shall hold office for a term for which
they are elected and until their successors are
elected and qualified. A director may, but need
not be a member or policyholder of the insurer
of which he is acting as director. Vacancies in
the board of directors may be filled by a
majority of the remaining directors, though less
than a quorum, and each director so elected
shall hold office until the next annual meeting.
(h) All insurers mutualized under the provisions
of this chapter shall be subject to all other
applicable provisions of this Code. The
provisions of the Corporation Code shall apply
in a suppletory manner.
Section 279. The provisions of Commonwealth
Act No. 83, otherwise known as the Securities
Act, as amended, shall not apply to any of the
following:
(a) Shares of the capital stock of such insurer
acquired as provided in Section 272 and
assigned and transferred to the trustees as is
provided in said section, and the assignment
and transfer of said shares as so provided;
(b) Any certificate or other instrument issued to
a policyholder of such mutualized insurer
conferring or evidencing membership in such
mutualized insurer or conferring or evidencing
such member’s right to participate in the profits
or share in the assets of such mutualized
insurer by virtue of his membership therein,
and the issuance of such certificate or other
instrument;
(c) The plan for the acquisition of the
outstanding shares of the capital stock of such
insurer authorized by the provisions of this
chapter, the submission of said plan to the
Commissioner and to the policyholders of such
insurer as provided in this chapter, and the
approval and carrying out of said plan or any
part thereof in accordance with the provisions
of this chapter.
Section 280. A domestic mutual life insurance
company doing business in the Philippines
may convert itself into an incorporated stock
life insurance company by demutualization. To
that end, it may provide and carry out a plan for
the conversion by complying with the
requirements of this title.
The conversion of a domestic mutual life
insurance company to an incorporated stock
life insurance company shall be carried out
pursuant to a conversion plan duly approved
by the Commissioner.
The Commissioner shall promulgate such rules
and regulations as he or she may deem
necessary to carry out the provisions of this
title, after due consultation with representatives
of the insurance industry.
All converted insurers under the provisions of
this title shall be subject to all other applicable
provisions of this Code. The provisions of the
Corporation Code shall apply in a suppletory
manner.
TITLE 18
WITHDRAWAL OF FOREIGN
INSURANCE COMPANIES
Section 281. A foreign insurance company
doing business in the Philippines, upon
payment of the fee hereinafter prescribed and
surrender to the Commissioner of its certificate
of authority, may apply to withdraw from the
Philippines. Such application shall be duly
executed in writing, accompanied by evidence
of due authority for such execution, properly
acknowledged.
Section 282. The Commissioner shall publish
the application for withdrawal once a week for
three (3) consecutive weeks in a newspaper of
general circulation in the Philippines. The
expenses of such publication shall be paid by
the insurance company filing such application.
Section 283. Every foreign insurance company
desiring to withdraw from the Philippines shall,
prior to such withdrawal, discharge its liabilities
to policyholders and creditors in this country. In
case of its policies insuring residents of the
Philippines, it shall cause the primary liabilities
under such policies to be reinsured and
assumed by another insurance company
authorized to transact business in the
Philippines. In the case of such policies as are
subject to cancellation by the withdrawing
company, it may cancel such policies pursuant
to the terms thereof in lieu of such reinsurance
and assumption of liabilities.
Section 284. The Commissioner shall cause an
examination of the books and records of the
withdrawing company, and if, upon such
examination, the Commissioner finds that the
insurer has no outstanding liabilities to
policyholders and creditors in the Philippines,
and no policies uncancelled; or its primary
liabilities have been reinsured or assumed by
another insurance company authorized to
transact business in the Philippines, as
required in the preceding section, it shall
cancel the withdrawing company’s certificate of
authority, if unexpired, and shall permit the
insurer to withdraw. The cost and expenses of
all such examination shall be paid as
prescribed in Section 440.
Section 285. Upon the failure of such
withdrawing insurance company or its agents
in the Philippines to pay the expenses of such
publication within thirty (30) days after the
presentation of the bill therefor, the
Commissioner shall collect such fee from the
deposit furnished in accordance with the
provisions of Section 197.
Section 286. A foreign life insurance company
that withdraws from the Philippines shall be
considered a servicing insurance company if
its business transactions are confined to
accepting periodic premium payments from, or
granting policy loans and paying cash
surrender values of outstanding policies to, or
reviving lapsed policies of, Philippine
policyholders, and such other related services.
Section 287. No company shall act as a
servicing insurance company until after it shall
have obtained a special certificate of authority
to act as such from the Commissioner upon
application therefor and payment by the
company of the fees hereinafter prescribed.
Such certificate shall expire on the last day of
December of the third year and shall be
renewed, while the company continues to
service its policyholders, and to comply with all
the applicable provisions of law and
regulations.
TITLE 19
PROFESSIONAL REINSURERS
Section 288. Except as otherwise provided in
this Code, no partnership, association or
corporation shall transact any business in the
Philippines as a professional reinsurer until it
shall have obtained a certificate of authority for
that purpose from the Commissioner upon
application therefor and payment by such
entity of the fees hereinafter prescribed. As
used in this Code, the term ‘professional
reinsurer’ shall mean any entity that transacts
solely and exclusively reinsurance business in
the Philippines.
The Commissioner may refuse to issue a
certificate of authority to any such entity when
such refusal will best promote public interest.
No such certificate of authority shall be granted
to any such entity unless and until the
Commissioner is satisfied by such examination
and such evidence as may be required that
such entity is qualified by the laws of the
Philippines to transact business therein as a
professional reinsurer.
Before issuing such certificate of authority, the
Commissioner must be satisfied that the name
of the applicant is not that of any other known
company transacting insurance or reinsurance
business in the Philippines, or a name so
similar as to be calculated to mislead the
public.
Such certificate of authority shall expire on the
last day of December the third year following
its issuance unless it is renewed.
Every such partnership, association, or
corporation receiving such certificate of
authority shall be subject to the provisions of
this Code and other related laws, and to the
jurisdiction and supervision of the
Commissioner.
Section 289. Any partnership, association, or
corporation authorized to transact solely
reinsurance business must have a
capitalization of at least Three billion pesos
(P3,000,000,000.00) paid in cash of which at
least fifty percent (50%) is paid-up and the
remaining portion thereof is contributed
surplus, which in no case shall be less than
Four hundred million pesos (P400,000,000.00)
or such capitalization as may be determined by
the Secretary of Finance, upon the
recommendation of the
Commissioner: Provided, That twenty-five
percent (25%) of the paid-up capital must be
invested in securities satisfactory to the
Commissioner consisting of bonds or other
instruments of debt of the Government of the
Philippines or its political subdivisions or
instrumentalities, or of government-owned or -
controlled corporations and entities, including
the Bangko Sentral ng Pilipinas, and deposited
with the Commissioner, and the remaining
seventy-five percent (75%) in such other
securities as may be allowed and permitted by
the Commissioner, which securities shall at all
times be maintained free from any lien or
encumbrance: Provided, further, That the
aforesaid capital requirement is without
prejudice to other requirements to be imposed
under any risk-based capital method that may
be adopted by the Commissioner: Provided,
finally, That the provisions of this chapter
applicable to insurance companies shall as far
as practicable be likewise applicable to
professional reinsurers.
TITLE 20
HOLDING COMPANIES
Section 290. As used in this title, the following
terms shall have the respective meanings
hereinafter set forth unless the context shall
otherwise require:
(a) Person means an individual, partnership,
firm, association, corporation, trust, any similar
entity or any combination of the foregoing
acting in concert.
(b) Control, including the terms controlling,
controlled by and under common control
with, means the possession directly or
indirectly of the power to direct or cause the
direction of the management and policies of a
person, whether through the ownership of
voting securities by a contract other than a
commercial contract for goods or non-
management services or otherwise. Subject to
Section 292, control shall be presumed to exist
if any person directly or indirectly owns,
controls or holds with the power to vote forty
percent (40%) or more of the voting securities
of any other person: Provided, That no person
shall be deemed to control another person
solely by reason of his being an officer or
director of such other person.
(c) Holding company means any person who
directly or indirectly controls any authorized
insurer.
(d) Controlled insurer means an authorized
insurer controlled directly or indirectly by a
holding company.
(e) Controlled person means any person, other
than a controlled insurer, who is controlled
directly or indirectly by a holding company.
(f) Holding company system means a holding
company together with its controlled insurers
and controlled persons.
Section 291. Notwithstanding paragraph (b) of
Section 290, the Commissioner may determine
after notice and opportunity to be heard, that a
person exercises directly or indirectly either
alone or pursuant to an agreement with one or
more other persons such a controlling
influence over the management or policies of
an authorized insurer as to make it necessary
or appropriate in the public interest or for the
protection of policyholders or stockholders of
the insurer that the person be deemed to
control the insurer.
Section 292. The Commissioner may
determine upon application that any person,
either alone or pursuant to agreement with one
or more other persons, does not or will not
upon the taking of some proposed action
control another person. The filing of an
application hereunder in good faith by any
person shall relieve the applicant from any
obligation or liability imposed by this title with
respect to the subject of the application, except
as contained in Section 302, until the
Commissioner has acted upon the application.
Within thirty (30) days or such further period as
he may prescribe, the Commissioner may
prospectively revoke or modify his
determination, after notice and opportunity to
be heard, whenever in his judgment,
revocation or modification is consistent with
this title.
Section 293. Notwithstanding any other
provisions of this title, the following shall not be
deemed holding companies:
(a) Authorized insurers or reinsurers or their
subsidiaries; and
(b) The Government of the Philippines, or any
political subdivision, agency or instrumentality
thereof, or any corporation which is wholly
owned directly or indirectly by one or more of
the foregoing.
The Commissioner may conditionally or
unconditionally exempt any specified person or
class of persons from any of the obligations or
liabilities imposed under this title, if and to the
extent he finds the exemption necessary or
appropriate in the public interest or not adverse
to the interests of policyholders or stockholders
and consistent with the purposes of this title.
Section 294. (a) Every person who on the date
this Code takes effect is a controlled insurer
and every person who thereafter becomes a
controlled insurer, shall, within sixty (60) days
thereafter, or within thirty (30) days after
becoming a controlled insurer, whichever is
later, register with the Commissioner. Such
registration shall be amended within thirty (30)
days following any change in the identity of its
holding company. The Commissioner may
grant one or more reasonable extensions of
the time to register.
(b) Every registrant shall furnish the
Commissioner with the following information
concerning its holding company:
(1) A copy of its charter or articles of
incorporation and its bylaws;
(2) The identities of its principal shareholders,
officers, directors and controlled persons; and
(3) Information as to its capital structure and
financial condition, and a description of its
principal business activities.
Section 295. Every controlled insurer shall file
with the Commissioner such reports or material
as he may direct for the purpose of disclosing
information concerning the operations of
persons within the holding company system
which may materially affect the operations,
management or financial condition of the
insurer.
Section 296. Every holding company and every
controlled person within a holding company
system shall be subject to examination by
order of the Commissioner if he has cause to
believe that the operations of such persons
may materially affect the operations,
management or financial condition of any
controlled insurer with the system and that he
is unable to obtain relevant information from
such controlled insurer. The grounds relied
upon by the Commissioner for such
examination shall be stated in his order, which
order shall be subject to judicial review only at
the instance of the person sought to be
examined. Such examination shall be confined
to matters specified in the order. The cost of
such examination shall be assessed against
the person examined and no portion thereof
shall thereafter be reimbursed to it directly or
indirectly by the controlled insurer.
Section 297. The Commissioner shall keep the
contents of each report made pursuant to this
title and any information obtained by him in
connection therewith confidential and shall not
make the same public without the prior written
consent of the controlled insurer to which it
pertains unless the Commissioner after notice
and an opportunity to be heard shall determine
that the interests of policyholders, stockholders
or the public will be served by the publication
thereof. In any action or proceeding by the
Commissioner against the person examined or
any other person within the same holding
company system a report of such examination
published by him shall be admissible as
evidence of the facts stated therein.
Section 298. Transactions within a holding
company system to which a controlled insurer
is a party shall be subject to the following:
(a) The terms shall be fair and equitable;
(b) Charges or fees for services performed
shall be reasonable;
(c) Expenses incurred and payments received
shall be allocated to the insurer on an equitable
basis in conformity with customary insurance
accounting practices consistently applied.
The books, accounts and records of each party
to all such transactions shall be maintained as
to clearly and accurately disclose the nature
and details of the transactions including such
accounting information as is necessary to
support the reasonableness of the charges or
fees to the respective parties.
Section 299. The prior written approval of the
Commissioner shall be required for the
following transactions between a controlled
insurer and any person in its holding company
system: sales, purchases, exchanges, loans or
extensions of credit, or investments, involving
five percent (5%) or more of the insurer’s
admitted assets as of the thirty-first day of
December next preceding.
Section 300. The following transactions
between a controlled insurer and any person in
its holding company system may not be
entered into unless the insurer has notified the
Commissioner in writing of its intention to enter
into any such transaction at least thirty (30)
days prior thereto, or such shorter period as he
may permit, and he has not disapproved it
within such period:
(a) Sales, purchases, exchanges, loans or
extensions of credit, or investments, involving
more than one-half of one percent (½%) but
less than five percent (5%) of the insurer’s
admitted assets as of the thirty-first day of
December next preceding;
(b) Reinsurance treaties or agreements;
(c) Rendering of services on a regular or
systematic basis; or
(d) Any material transaction, specified by
regulation, which the Commissioner
determines may adversely affect the interest of
the insurer’s policyholders or stockholders or of
the public.
Nothing herein contained shall be deemed to
authorize or permit any transaction which, in
the case of a non-controlled insurer, would be
otherwise contrary to law.
Section 301. The Commissioner, in reviewing
transactions pursuant to Sections 299 and 300,
shall consider whether the transactions comply
with the standard set forth in Section 298 and
whether they may adversely affect the interests
of policyholders. This section shall not apply to
transactions subject to other sections of this
Code which impose notice or approval
requirements greater than those prescribed by
this title.
Section 302. (a) No person, other than an
authorized insurer, shall acquire control of any
domestic insurer, whether by purchase of its
securities or otherwise, except:
(1) After twenty (20) days written notice to its
insurer or such shorter period as the
Commissioner may permit, of its intention to
acquire control; and
(2) With the prior written approval of the
Commissioner.
(b) The Commissioner shall disapprove the
acquisition of control of a domestic insurer if he
determines, after notice and an opportunity to
be heard, that such action is reasonably
necessary to protect the interest of the people
of this country. The following shall be the only
factors to be considered by him in reaching the
foregoing determination:
(1) The financial condition of the acquiring
person and the insurer;
(2) The trustworthiness of the acquiring person
or any of its officers or directors;
(3) A plan for the proper and effective conduct
of the insurer’s operations;
(4) The source of the funds or assets for the
acquisition;
(5) The fairness of any exchange of stock,
assets, cash or other consideration for the
stock or assets to be received;
(6) Whether the effect of the acquisition may be
substantially to lessen competition in any line
of commerce in insurance or to tend to create
a monopoly therein; and
(7) Whether the acquisition is likely to be
hazardous or prejudicial to the insurer’s
policyholders or stockholders.
(c) The following conditions affecting any
controlled insurer, regardless of when such
control has been acquired, are violations of this
title:
(1) The controlling person or any of its officers
or directors have demonstrated
untrustworthiness; and
(2) The effect of retention of control may be
substantially to lessen competition in any line
of commerce in insurance in this country or to
tend to create a monopoly therein. If, after
notice and an opportunity to be heard, the
Commissioner determines that any of the
foregoing violations exists, he shall reduce his
findings to writing and shall issue an order
based thereon and cause the same to be
served upon the insurer and upon all persons
affected thereby directing any person found to
be in violation thereof to take appropriate
action to cure such violation. Upon the failure
of any such person to comply with such order,
Section 306 shall become applicable.
(d) The Commissioner may require the
submission of such information as he deems
necessary to determine whether any
acquisition or retention of control complies with
this title and may require, as a condition of
approval of such acquisition or retention of
control, that all or any portion of such
information be disclosed to the insurer’s
stockholders.
(e) Unless subject to registration under Section
294 or unless acquisition of its control is
subject to paragraphs (a) and (b) hereof, every
authorized insurer shall notify the
Commissioner in writing of the identity of any
person whom the insurer then knows or has
reason to believe controls or has taken any
action, other than preliminary negotiations or
discussion, to acquire control of the insurer.
Section 303. (a) Notwithstanding the control of
an authorized insurer by any person, the
officers and directors of the insurer shall not
thereby be relieved of any obligation or liability
to which they would otherwise be subject by
law, and the insurer shall be managed so as to
assure its separate operating identity
consistent with this title.
(b) Nothing herein shall preclude an authorized
insurer from having or sharing a common
management or cooperative or joint use of
personnel, property or services with one or
more other persons under arrangements
meeting the standards of Section 298.
Section 304. To the extent that any information
or material is set forth in forms or other matter
on file with any government agency or in a
registration form filed with the Commissioner
by another person within the same holding
company system, the controlled insurer may
comply with the registration or reporting
requirements of this title by referring in its
registration form or report to such other filed
matter and attaching a copy thereof certified by
the insurer as a true and complete copy, to
such registration form or report or, if such other
filed matter is on file with the Commissioner,
incorporating such matter by reference.
Section 305. No holding company or controlled
person shall directly or indirectly or through
another person do or cause to be done for or
in behalf of the controlled insurer any act
intended to affect the insurance operations of
the insurer which, if done by the insurer, would
violate any provision of this Code.
Section 306. In addition to any other penalty
provided by law, the Commissioner may, upon
the willful failure of any person within a holding
company system to comply with this title or any
regulation or order promulgated hereunder:
(a) Proceed under Title 14 or Title 15, Chapter
III of this Code with respect to insurer within the
holding company system; or
(b) Revoke or refuse to renew the authority to
do business in this country of an insurer within
the holding company system or refuse to issue
such authority to any other insurer in the
system; or
(c) Direct that, in addition to any other penalty
provided by law, such person forfeit to the
people of this country a sum not less than Five
thousand pesos (P5,000.00) for a first violation
and Twenty-five thousand pesos (P25,000.00)
for any subsequent violation. An additional
sum not less than Twenty-five thousand pesos
(P25,000.00) shall be imposed for each month
during which any such violation shall continue.
CHAPTER IV
SALES AGENCIES AND TECHNICAL
SERVICES
TITLE 1
INSURANCE AGENTS AND INSURANCE
BROKERS
Section 307. No insurance company doing
business in the Philippines, nor any agent
thereof, shall pay any commission or other
compensation to any person for services in
obtaining insurance, unless such person shall
have first procured from the Commissioner a
license to act as an insurance agent of such
company or as an insurance broker as
hereinafter provided.
No person shall act as an insurance agent or
as an insurance broker in the solicitation or
procurement of applications for insurance, or
receive for services in obtaining insurance, any
commission or other compensation from any
insurance company doing business in the
Philippines, or any agent thereof, without first
procuring a license so to act from the
Commissioner, which must be renewed every
three (3) years thereafter. Such license shall
be issued by the Commissioner only upon the
written application of the person desiring it,
such application if for a license to act as
insurance agent, being approved or endorsed
by the company such person desires to
represent, and shall be upon a form prescribed
by the Commissioner giving such information
as he may require, and upon payment of the
corresponding fee hereinafter prescribed. The
Commissioner shall satisfy himself as to the
competence and trustworthiness of the
applicant and shall have the right to refuse to
issue or renew and to suspend or revoke any
such license in his discretion. The license shall
expire after the thirty-first day of December of
the third year following the date of issuance
unless it is renewed.
Licenses may be renewed in the case of the
company represented by such agents, and in
the case of insurance brokers, upon the
application of the said brokers, themselves.
Section 308. The provisions of Sections 307
and 309 shall apply to an employee who shall
be engaged to sell insurance products by an
insurance company.
Section 309. Any person who for
compensation solicits or obtains insurance on
behalf of any insurance company or transmits
for a person other than himself an application
for a policy or contract of insurance to or from
such company or offers or assumes to act in
the negotiating of such insurance shall be an
insurance agent within the intent of this section
and shall thereby become liable to all the
duties, requirements, liabilities and penalties to
which an insurance agent is subject.
An insurance agent is an independent
contractor and not an employee of the
company represented. ‘Insurance agent’
includes an agency leader, agency manager,
or their equivalent.
Since the insurance industry is imbued with
public interest, the insurance companies upon
approval of the Commissioner may exercise
wide latitude in supervising the activities of
their insurance agents to ensure the protection
of the insuring public.
Section 310. Any person who for any
compensation, commission or other thing of
value acts or aids in any manner in soliciting,
negotiating or procuring the making of any
insurance contract or in placing risk or taking
out insurance, on behalf of an insured other
than himself, shall be an insurance broker
within the intent of this Code, and shall thereby
become liable to all the duties, requirements,
liabilities and penalties to which an insurance
broker is subject.
Section 311. Every applicant for an insurance
broker’s license shall file with the application
and shall thereafter maintain in force while so
licensed, a bond in favor of the people of the
Republic of the Philippines executed by a
company authorized to become surety upon
official recognizances, stipulations, bonds and
undertakings. The bond shall be in such
amount as may be fixed by the Commissioner,
but in no case less than Five hundred thousand
pesos (P500,000.00), and shall be conditioned
upon full accounting and due payment to the
person entitled thereto of funds coming into the
broker’s possession through insurance
transactions under license. The bond shall
remain in force until released by the
Commissioner, or until cancelled by the surety.
Without prejudice to any liability previously
incurred thereunder, the surety may cancel the
bond on thirty (30) days advance written notice
to both the broker and the Commissioner.
Upon approval of the application, the applicant
must also file two (2) errors and omissions
(professional liability or professional indemnity)
policies issued separately by two (2) insurance
companies authorized to do business in the
Philippines, satisfactory to the Commissioner
to indemnify the applicant against any claim or
claims for breach of duty as insurance broker
which may be made against him by reason of
any negligent act, error or omission, whenever
or wherever committed or alleged to have been
committed, on the part of the applicant or any
person who has been, is now, or may hereafter
during the subsistence of the policies be
employed by the said applicant in his capacity
as insurance broker: Provided, That the filing
of any claim or claims under one of such
policies shall preclude the filing of the said
claim or claims under the other policy. The said
policies shall be in such amounts as may be
prescribed by the Commissioner, depending
upon the size or amount of the broking
business of the applicant, but in no case shall
the amount of each of such policies be less
than Five hundred thousand pesos
(P500,000.00).
Section 312. The Commissioner shall, in order
to determine the competence of every
applicant to have the kind of license applied for,
require such applicant to submit to a written
examination and to pass the same to the
satisfaction of the Commissioner. The
Commissioner may delegate or authorize the
administration of the examination to an
independent organization, subject to such
conditions that the Commissioner may provide.
Section 313. An applicant for the written
examination mentioned in the preceding
section must be of good moral character and
must not have been convicted of any crime
involving moral turpitude. He must
satisfactorily show to the Commissioner that he
has been trained in the kind of insurance
contemplated in the license applied for. Such
examination may be waived if it is shown to the
satisfaction of the Commissioner that the
applicant has undergone extensive education
and/or training in insurance.
Section 314. An application for the issuance or
renewal of a license to act as an insurance
agent or insurance broker may be refused, or
such license, if already issued or renewed,
shall be suspended or revoked if the
Commissioner finds that the applicant for, or
holder of, such license:
(a) Has willfully violated any provision of this
Code; or
(b) Has intentionally made a material
misstatement in the application to qualify for
such license; or
(c) Has obtained or attempted to obtain a
license by fraud or misrepresentation; or
(d) Has been guilty of fraudulent or dishonest
practices; or
(e) Has misappropriated or converted to his
own use or illegally withheld moneys required
to be held in a fiduciary capacity; or
(f) Has not demonstrated trustworthiness and
competence to transact business as an
insurance agent or insurance broker in such
manner as to safeguard the public; or
(g) Has materially misrepresented the terms
and conditions of policies or contracts of
insurance which he seeks to sell or has sold;
or
(h) Has failed to pass the written examination
prescribed, if not otherwise exempt from taking
the same.
In addition to the foregoing causes, no license
to act as insurance agent or insurance broker
shall be renewed if the holder thereof has not
been actively engaged as such agent or broker
in accordance with such rules as the
Commissioner may prescribe.
Section 315. The premium, or any portion
thereof, which an insurance agent or insurance
broker collects from an insured and which is to
be paid to an insurance company because of
the assumption of liability through the issuance
of policies or contracts of insurance, shall be
held by the agent or broker in a fiduciary
capacity and shall not be misappropriated or
converted to his own use or illegally withheld
by the agent or broker.
Any insurance company which delivers to an
insurance agent or insurance broker a policy or
contract of insurance shall be deemed to have
authorized such agent or broker to receive on
its behalf payment of any premium which is due
on such policy or contract of insurance at the
time of its issuance or delivery or which
becomes due thereon.
In order to ensure faithful performance by the
insurance agent or insurance broker of these
fiduciary responsibilities, the Insurance
Commissioner shall prescribe the minimum
terms and conditions on such matters in the
standard agency or brokers agreement
between the agents and/or the broker with the
insurance companies.
Section 316. Any provision of existing laws to
the contrary notwithstanding, no person shall,
within the Philippines, sell or offer for sale a
variable contract or do or perform any act or
thing in the sale, negotiation, making or
consummating of any variable contract other
than for himself unless such person shall have
a valid and current license from the
Commissioner authorizing such person to act
as a variable contract agent. No such license
shall be issued unless and until the
Commissioner is satisfied, after examination
that such person is by training, knowledge,
ability and character qualified to act as such
agent. Any such license may be withdrawn and
cancelled by the Commissioner after notice
and hearing, if he shall find that the holder
thereof does not then have the qualifications
required for the issuance of such license.
Section 317. It shall be unlawful for any person,
company or corporation in the Philippines to
act as general agent of any insurance
company unless he is empowered by a written
power of attorney duly executed by such
insurance company, and registered with the
Commissioner to receive notices, summons
and legal processes for and in behalf of the
insurance company concerned in connection
with actions or other legal proceedings against
said insurance company. It shall be the duty of
said general agent to notify the Commissioner
of his post office address in the Philippines, or
any change thereof. Notices, summons, or
processes of any kind sent by registered mail
to the last registered address of such general
agent of the company concerned or to the
Commissioner shall be sufficient service and
deemed as if served on the insurance
company itself.
Section 318. Except as otherwise provided by
law or treaty, it shall be unlawful for any person,
partnership, association or corporation in the
Philippines, for himself or itself, or for some
other person, partnership, association or
corporation, either to procure, receive or
forward applications of insurance in, or to issue
or to deliver or accept policies or contracts of
insurance of or for, any insurance company or
companies not authorized to transact business
in the Philippines, covering risks, life or non-
life, situated in the Philippines; and any such
person, partnership, association or corporation
violating the provisions of this section shall be
deemed guilty of a penal offense, and upon
conviction thereof, shall for each such offense
be punished by a fine of Two hundred fifty
thousand pesos (P250,000.00), or
imprisonment of six (6) months, or both, at the
discretion of the court: Provided, That the
provisions of this section shall not apply to
reinsurance.
TITLE 2
REINSURANCE BROKERS
Section 319. Except as provided in the next
succeeding title, no person shall act as
reinsurance broker in the Philippines unless he
is authorized as such by the Commissioner.
A reinsurance broker is one who, for
compensation, not being a duly authorized
agent, employee or officer of an insurer in
which any reinsurance is effected, acts or aids
in any manner in negotiating contracts of
reinsurance, or placing risks of effecting
reinsurance, for any insurance company
authorized to do business in the Philippines.
Section 320. Upon application and payment of
the corresponding fee hereinafter prescribed,
and the filing of two (2) errors and omissions
(professional liability or professional indemnity)
policies hereinafter described, a person may, if
found qualified, be issued a license to act as
reinsurance broker by the Commissioner. No
such license shall be valid after December 31
of the third year following its issuance unless it
is renewed.
The errors and omissions (professional liability
or professional indemnity) policies mentioned
above shall indemnify the applicant against
any claim or claims for breach of duty as
reinsurance broker which may be made
against him by reason of any negligent act,
error or omission, whenever or wherever
committed or alleged to have been committed,
on the part of the applicant or any person who
has been, is now, or may hereafter during the
subsistence of the policies be employed by the
said applicant in his capacity as reinsurance
broker: Provided, That the filing of any claim or
claims under one of such policies shall
preclude the filing of the said claim or claims
under the other policy. The said policies shall
be issued separately by two (2) insurance
companies authorized to do business in the
Philippines and shall be in such amounts as
may be prescribed by the Insurance
Commissioner, depending upon the size or
amount of the broking business of the
applicant, but in no case shall the amount of
each of such policies be less than Five hundred
thousand pesos (P500,000.00).
Section 321. The Commissioner may recall,
suspend or revoke the license granted to a
reinsurance broker for violation of any existing
law, rule and regulation, or any provision of this
Code after due notice and hearing.
TITLE 3
RESIDENT AGENTS
Section 322. No person shall act as resident
agent, as hereinafter defined, unless he is
registered as such with the Commissioner.
Section 323. The term resident agent, as used
in this title, is one duly appointed by a foreign
insurer or broker not authorized to do business
in the Philippines to receive in its behalf
notices, summons and legal processes in
connection with actions or other legal
proceedings against such foreign insurer or
broker.
Section 324. The application for a certificate of
registration as resident agent filed with the
Commissioner must be accompanied with a
copy of the power of attorney, duly notarized
and authenticated by the Philippine Consul in
the place where such foreign insurer or broker
is domiciled, empowering the applicant to act
as resident agent and to receive notices,
summons and legal processes for and in behalf
of such foreign insurer or broker in connection
with any action or legal proceeding against
such foreign insurer or broker.
Section 325. It shall be the duty of such
resident agent to notify immediately the
Commissioner of any change of his office
address.
Section 326. A certificate of registration issued
to a resident agent shall expire on the thirty-
first day of December of the third year following
its issuance unless it is renewed.
The Commissioner may, after due notice and
hearing, recall or cancel the certificate of
registration issued to a resident agent for
violation of any existing law, rule or regulation,
or any provision of this Code.
TITLE 4
NON-LIFE COMPANY UNDERWRITER
Section 327. No person shall act, and no
company shall employ any person, as non-life
company underwriter, whose duty and
responsibility it shall be to select, evaluate and
accept risks for, and to determine the terms
and conditions, including those pertaining to
amounts of retentions, under which such risks
are to be accepted by the company, unless
such underwriter is registered as such with the
Commissioner.
Section 328. Every non-life insurance
company doing business in the Philippines
must maintain at all times a register of risks
accepted and a claims register for each line of
risks engaged in by such non-life insurance
company with such entries therein as are now
or as may hereafter be required by the
Commissioner, and it shall be the responsibility
of the underwriter on the particular line of risk
involved to see to it that the said registers are
well maintained and kept, and that all entries
therein are properly and correctly recorded.
Such registers shall be open to inspection and
examination of duly authorized representatives
of the Commissioner at all times during
business hours.
Section 329. No person shall be registered with
the Commissioner, unless such person shall
be at least twenty-one (21) years of age on the
date of such registration; a resident of the
Philippines; of good moral character and with
no conviction of any crime involving moral
turpitude; has had at the time such registration
is made at least two (2) years of underwriting
work in the particular line of risk involved; and
has passed such qualifying written
examination that the Commissioner shall
conduct at such time and in such place as he
may decide to hold for applicants desiring to
act as underwriters.
Such examination shall not be required of any
person who has served as non-life company
underwriter for a period of at least five (5)
years, if the Commissioner is satisfied of the
applicant’s competence as shown by the
results of his underwriting work in the non-life
insurance company or companies that
employed him in that capacity. The minimum
underwriting experience herein required may
be reduced or waived if it is shown to the
satisfaction of the Commissioner that the non-
life company underwriter has undergone
extensive education and/or training in
insurance.
Section 330. Any applicant who misrepresents
or omits any material fact in his application for
registration as a non-life company underwriter,
or commits any dishonest act in taking or in
connection with the qualifying written
examination for underwriters, shall be barred
from being registered as such non-life
company underwriter and, if already
registered, his registration shall be cancelled
and the certificate of registration issued in his
favor shall be recalled immediately by the
Commissioner.
In the event that the certificate of authority of a
non-life insurance company to transact
business is suspended or revoked due to
business failure arising largely from the
imprudent and injudicious acceptance of risks
by the underwriter concerned, the registration
of such underwriter shall likewise be cancelled
and his certificate of registration shall be
recalled by the Commissioner, and no similar
certificate shall thereafter be issued in his
favor.
Section 331. No certificate of registration
issued to an underwriter shall be valid after
December 31 of the third year following its
issuance unless it is renewed.
The Commissioner may, after due notice and
hearing, also suspend or cancel such
certificate for violation of existing laws, rules
and regulations or of any provisions of this
Code.
TITLE 5
ADJUSTERS
Section 332. No person, partnership,
association, or corporation shall act as an
adjuster, as hereinafter defined, unless
authorized so to act by virtue of a license
issued or renewed by the Commissioner
pursuant to the provisions of this
Code: Provided, That in the case of a natural
person, he must be a Filipino citizen and in the
case of a partnership, association or
corporation, at least sixty percent (60%) of its
capital must be owned by citizens of the
Philippines.
Section 333. An adjuster may be an
independent adjuster or a public adjuster.
The term independent adjuster means any
person, partnership, association or corporation
which, for money, commission or any other
thing of value, acts for or on behalf of an insurer
in the adjusting of claims arising under
insurance contracts or policies issued by such
insurer.
The term public adjuster means any person,
partnership, association or corporation which,
for money, commission or any other thing of
value, acts on behalf of an insured in
negotiating for, or effecting, the settlement of a
claim or claims of the said insured arising
under insurance contracts or policies, or which
advertises for or solicits employment as an
adjuster of such claims.
Section 334. For every line of insurance claim
adjustment, adjusters shall be licensed either
as independent adjusters or as public
adjusters. No adjuster shall act on behalf of an
insurer unless said adjuster is licensed as an
independent adjuster; and no adjuster shall act
on behalf of an insured unless said adjuster is
licensed as a public adjuster: Provided,
however, That when a firm or person has been
licensed as a public adjuster, he shall not be
granted another license as independent
adjuster and vice versa.
No license, however, shall be required of any
company adjuster who is a salaried employee
of an insurance company for the adjustment of
claims filed under policies issued by such
insurance company.
Section 335. Such license or any renewal
thereof may be issued by the Commissioner
upon written application filed by the person
interested on the form or forms prescribed by
the Commissioner, which shall contain such
information as he may require, and upon
payment of the corresponding fee hereinafter
prescribed.
Section 336. The Commissioner shall conduct,
at such times, and in such places as he may
decide to hold, written examinations to
determine the competence and ability of
applicants desiring to act as adjuster of
insurance claims.
Section 337. No adjuster’s license issued
hereunder shall be valid after December 31 of
the third year following the issuance of such
license unless it is renewed.
Section 338. Nothing contained in this title shall
apply to any duly licensed attorney-at-law who
acts or aids in adjusting insurance claims as an
incident to the practice of his profession and
who does not advertise himself as an adjuster.
Section 339. The Commissioner may suspend
or revoke any adjuster’s license if, after giving
notice and hearing to the adjuster concerned,
the Commissioner finds that the said adjuster:
(a) Has violated any provision of this Code and
of the circulars, rulings and instructions of the
Commissioner or has violated any law in the
course of his dealings as an adjuster; or
(b) Has made a material misstatement in the
application for such license; or
(c) Has been guilty of fraudulent or dishonest
practices; or
(d) Has demonstrated his incompetence or
untrustworthiness to act as adjuster; or
(e) Has made patently unjust valuation of loss;
or
(f) Has failed to make a report of the
adjustment he proposed within sixty (60) days
from the date of the filing of the claim by the
insured with the insurer, unless prevented so
to do by reasons beyond his control; or
(g) Has refused to allow an examination into his
affairs or method of doing business as
hereinafter provided.
Section 340. Every adjuster shall submit to the
Commissioner a quarterly report of all losses
which are the subject of adjustment effected by
him during each month in the form prescribed
by the Commissioner. The report shall be filed
within one (1) month after the end of each
quarter.
Section 341. Every adjuster shall keep his or
its books, records, reports, accounts, and
vouchers in such manner that the
Commissioner or his duly authorized
representatives may readily verify the quarterly
reports of the said adjuster and ascertain
whether the said adjuster has complied with
the provisions of law or regulations obligatory
upon him or whether the method of doing
business of the said adjuster has been fair, just
and honest.
Section 342. The Commissioner shall, at least
once a year and whenever he considers the
public interest so demands, cause an
examination to be made into the affairs and
method of doing business of every adjuster.
Section 343. Any violation of any provision of
this title shall be punished by a fine of not less
than Ten thousand pesos (P10,000.00), or by
imprisonment at the discretion of the
court: Provided, That, in case of a partnership,
association or corporation, the said penalty
shall be imposed upon the partner, president,
manager, managing director, director or
person in charge of its business or responsible
for the violation.
TITLE 6
ACTUARIES
Section 344. No life insurance company shall
be licensed to do business in the Philippines
nor shall any life insurance company doing
business in the Philippines be allowed to
continue doing such business unless they shall
engage the services of an actuary duly
accredited with the Commissioner who shall,
during his tenure of office, be directly
responsible for the direction and supervision of
all actuarial work connected with or that may
be involved in the business of the insurance
company. The Commissioner may also require
non-life insurance companies to engage the
services of an accredited actuary, in
accordance with the rules and regulations that
the Commissioner will formulate.
Section 345. Any person may be officially
accredited by the Commissioner to act as an
actuary in any life insurance company or in any
mutual benefit association authorized to do
business in the Philippines upon application
therefor and the payment of the corresponding
fee hereinafter prescribed: Provided, That:
(a) He is a fellow of good standing of the
Actuarial Society of the Philippines at the time
of his appointment and remains in such good
standing during the tenure of his engagement;
or
(b) In the case of one who is not a fellow of the
Actuarial Society of the Philippines, he meets
all the requirements of the said Society for
accreditation as a fellow of the Society, and
has been given permission by the pertinent
government authorities in the Philippines to
render services in the Philippines, in the event
that he is not a citizen of the Philippines.
The registration of the actuary shall be
suspended or revoked by the Commissioner
on the following grounds:
(1) Failure to adequately perform required
functions and duties under this Code;
(2) Failure to disclose conflict of interest;
(3) Failure to comply with the Code of Conduct
of the Actuarial Society of the Philippines; or
(4) Such other grounds that may be
determined by the Commissioner.
No actuary engaged by a life insurance
company shall be at the same time a
stockholder or a director of the board, chief
executive officer or chief financial officer of the
company or hold any position that the
Commissioner may determine to have an
inherent conflict of interest to the position of an
actuary.
No certificate of registration issued under this
title shall be valid after December 31 of the
third year following its issuance unless it is
renewed.
Section 346. The following documents, which
are from time to time submitted to the
Commissioner by a life insurance company
authorized to do business in the Philippines,
shall be duly certified by an accredited actuary
employed by such company:
(a) Policy reserves, claims or loss reserves and
net due and deferred premiums.
(b) Statements of bases and net premiums,
loading for gross premiums, and on non-
forfeiture values and reserves, when applying
for approval of gross premiums, reserves and
non-forfeiture values.
(c) Policies of insurance under any plan
submitted to the Commissioner as required by
law.
(d) Annual statements and valuation reports
submitted to the Commissioner as required by
law.
(e) Financial projection showing the probable
income and outgo and reserve requirements,
enumerating the actuarial assumptions and
bases of projections.
(f) Valuation of annuity funds or retirement
plans.
The Commissioner may also require non-life
insurance companies to submit, from time to
time, similar documents which shall be duly
certified by an accredited actuary employed by
such company.
Any life insurance company authorized to do
business in the Philippines may employ any
person who is not officially accredited under
either of the qualifications for any kind of
actuarial work: Provided, That he shall not, at
any time, have the authority to certify to the
correctness of the foregoing documents.
Section 347. No accredited actuary shall serve
more than one client or employer at the same
time. However, one already in the employ of an
insurance company may be allowed by the
Commissioner to serve a mutual benefit
association or any other insurance company,
provided the following conditions are first
complied with:
(a) That the request to engage his services by
the other employer is in writing;
(b) That his present employer acquiesced to it
in writing; and
(c) That he furnishes the Commissioner with
copies of said request and acquiescence.
No external auditor shall be engaged by
supervised persons or entities unless it has
been issued an accreditation certificate by the
Commissioner. The accreditation certificate
shall be valid until December 31 of the third
year from issuance unless it is revoked or
suspended. The Commissioner shall issue
rules and regulations to govern the
accreditation of the external auditor and the
revocation or suspension of the accreditation.
TITLE 7
RATING ORGANIZATION AND RATE
MAKING
Section 348. Every organization which now
exists or which may hereafter be formed for the
purpose of making rates to be used by more
than one insurance company authorized to do
business in the Philippines shall be known as
a rating organization. The term rate as used in
this title shall generally mean the ratio of the
premium to the amount insured and shall
include, as the context may require, either the
consideration to be paid or charged for
insurance contracts, including surety bonds, or
the elements and factors forming the basis for
the determination or application of the same, or
both.
Section 349. Every rating organization which
now exists or which may hereafter be formed
shall be subject to the provisions of this title.
Section 350. No rating organization hereafter
formed shall commence rate-making
operations until it shall have obtained a license
from the Commissioner. Before obtaining such
license, such rating organization shall file with
the Commissioner a notice of its intention to
commence rate-making operations, a copy of
its constitution, articles of agreement or
association, or of incorporation, and its bylaws,
a list of insurance companies that have agreed
to become members or subscribers, and such
other information concerning such rating
organization and its operations as may be
required by the Commissioner. If the
Commissioner finds that the organization has
complied with the provisions of law and that it
has a sufficient number of members or
subscribers and is otherwise qualified to
function as a rating organization, the
Commissioner may issue a license to such
rating organization authorizing it to make rates
for the kinds of insurance or subdivisions
thereof as may be specified in such license. No
license issued to a rating organization shall be
valid after December 31 of the third year
following its issuance unless it is renewed. No
rating organization which now exists and is not
licensed pursuant to this section shall continue
rate-making operations until it shall have
obtained from the Commissioner a license
which he may issue if satisfied that such
organization is complying with the provisions of
this title. Every rating organization shall notify
the Commissioner promptly of every change in:
(a) Its constitution, its articles of agreement or
association or its certificate of incorporation,
and its bylaws, rules and regulations governing
the conduct of its business; and
(b) Its list of members and subscribers.
A member means an insurer who participates
in or is entitled to participate in the
management of a rating organization.
A subscriber means an insurer which is
furnished at its request with rates and rating
manuals by a rating organization of which it is
not a member.
Section 351. Each rating organization shall
furnish its rating service without discrimination
to all of its members and subscribers, and
shall, subject to reasonable rules and
regulations, permit any insurance company
doing business in the Philippines, not admitted
to membership, to become a subscriber to its
rating services for any kind of insurance or
subdivisions thereof. Notice of proposed
changes in such rules and regulations shall be
given to subscribers. The reasonableness of
any rule or regulation in its application to
subscribers, or the refusal of any rating
organization to admit an insurance company
as a subscriber, shall, at the request of any
subscriber or any such insurance company, be
reviewed by the Commissioner at a hearing
held upon at least ten (10) days’ written notice
to such rating organization and to such
subscriber or insurance company. The
Commissioner may, after such hearing, issue
an appropriate order.
Section 352. No rating organization or any
other association shall refuse to do business
with, or prohibit or prevent the payment of
commissions to, any person licensed as an
insurance broker pursuant to the provisions of
Title 1 of this chapter.
Section 353. Rating organizations shall be
subject to examination by the Commissioner,
as often as he may deem such examination
expedient, pursuant to the provisions of this
Code applicable to the examination of
insurance companies. He shall cause such an
examination of each rating organization to be
made at least once in every five (5) years.
Section 354. The Commissioner may suspend
or revoke the license of any rating organization
which fails to comply with his order within the
time limited by such order, or any extension
thereof which he may grant. The
Commissioner may determine when a
suspension of license shall become effective
and it shall remain in effect for the period fixed
by him, unless he modifies or rescinds such
suspension.
Section 355. Any rating organization may
subscribe for or purchase actuarial, technical
or other services, and such services shall be
available to all members and subscribers
without discrimination.
Section 356. Any rating organization may
provide for the examination of policies, daily
reports, binders, renewal certificates,
endorsements or other instruments of
insurance, or the cancellation thereof, and may
make reasonable rules governing their
submission. Such rules shall contain a
provision that in the event an insurance
company does not within sixty (60) days
furnish satisfactory evidence to the rating
organization of the correction of any error or
omission previously called to its attention by
the rating organization, it shall be the duty of
the rating organization to notify the
Commissioner thereof. All information so
submitted for examination shall be confidential.
Section 357. Cooperation among rating
organizations or among rating organizations
and insurers in rate making or in other matters
within the scope of this title is hereby
authorized, provided the filings resulting from
such cooperation are subject to all provisions
of this title which are applicable to filings
generally. The Commissioner may review such
cooperative activities and practices and if he
finds that any such activity or practice is unfair
or unreasonable or otherwise inconsistent with
the provisions of this title, he may issue a
written order specifying in what respects such
activity or practice is unfair or unreasonable or
otherwise inconsistent with the provisions of
this title, and requiring the discontinuance of
such activity or practice.
Section 358. Every rating organization and
every insurance company which makes and
files its own rates, shall make rates for all risks
rated by such organization or insurance
company in accordance with the following
provisions:
(a) Basic classification, manual, minimum,
class, or schedule rates or rating plans, shall
be made and adopted for all such risks. Any
departure from such rates shall be in
accordance with schedules, rating plans and
rules filed with the Commissioner;
(b) Rates shall be reasonable and adequate for
the class of risks to which they apply;
(c) No rate shall discriminate unfairly between
risks involving essentially the same hazards
and expense elements or between risks in the
application of like charges and credits;
(d) Consideration shall be given to the past and
prospective loss experience, including the
conflagration and catastrophe hazards, if any,
to all factors reasonably attributable to the
class of risks, to a reasonable profit, to
commissions paid during the most recent
annual period and to past and prospective
other expenses. In case of fire insurance rates,
consideration shall be given to the experience
of the fire insurance business during a period
of not less than five (5) years next preceding
the year in which the review is made;
(e) Risk may be grouped by classifications for
the establishment of rates and minimum
premiums. Classification rates may be
modified to produce rates for individual risks in
accordance with rating plans which establish
standards for measuring variations in hazards
or expense provisions, or both. Such standards
may measure any difference among risks that
can be demonstrated to have a probable effect
upon losses or expenses.
Section 359. No rating organization and no
insurance company which makes and files its
own rates shall make or promulgate any rate or
schedule of rates which is to be applied to any
fire risk on the condition that the whole amount
of insurance on any risk or any specified part
thereof shall be placed with the members of or
subscribers to such rating organization or with
such insurer.
Section 360. Every insurance company doing
business in the Philippines shall annually file
with the rating organization of which it is a
member or subscriber, or with such other
agency as the Commissioner may designate, a
statistical report showing a classification
schedule of its premiums and losses on all
kinds or types of insurance business to which
Section 358 is applicable, and such other
information as the Commissioner may deem
necessary or expedient for the administration
of the provisions of this title.
Section 361. Every non-life rating organization
and every non-life insurance company doing
business in the Philippines shall file with the
Commissioner, except as to risks which by
general custom of the business are not written
according to manual rates or rating plans,
every rate manual, schedule of rates,
classification of risks, rating plan, and every
other rating rule and every modification of any
of the foregoing which it proposes to use. An
insurance company may satisfy its obligation to
make such filings for any kind or type of
insurance by becoming a member of or
subscriber to a rating organization which
makes such filings for such kind or type of
insurance, and by authorizing the
Commissioner to accept such filings of the
rating organization on behalf of such insurance
company.
Section 362. Every manual or schedule of
rates and every rating plan filed as provided in
the preceding section shall state or clearly
indicate the character and extent of the
coverage to which any such rate or any
modification thereof will be applied.
Section 363. The Commissioner shall review
filings as soon as reasonably possible after
they have been made in order to determine
whether they meet the requirements of this
title. When a filing is not accompanied by the
information upon which the insurance
company supports such filing, and the
Commissioner does not have sufficient
information to determine whether such filing
meets the requirements of this title, he shall
require such insurance company to furnish the
information upon which it supports such filing.
The information furnished in support of a filing
may include:
(a) The experience or judgment of the
insurance company or rating organization
making the filing;
(b) Its interpretation of any statistical data it
relies upon;
(c) The experience of other insurance
companies or rating organization; or
(d) Any other relevant factors.
Section 364. If the Commissioner finds that any
rate filings theretofore filed with him do not
comply with the provisions of this title or that
they provide rates or rules which are
inadequate, excessive, unfairly discriminatory
or otherwise unreasonable, he may order the
same withdrawn and at the expiration of sixty
(60) days thereafter the same shall be deemed
no longer on file. Before making any such
finding and order, the Commissioner shall give
notice, not less than ten (10) days in advance,
and a hearing, to the rating organization, or to
the insurer, which filed the same. Such order
shall not affect any contract or policy made or
issued prior to the expiration of such sixty (60)-
day period.
Section 365. No member or subscriber of a
rating organization, and no insurance company
doing business in the Philippines, or agent,
employee or other representative of such
company, and no insurance broker shall
charge or demand a rate or receive a premium
which deviates from the rates, rating plans,
classifications, schedules, rules and
standards, made and last filed by a rating
organization or by or on behalf of the insurance
company, or shall issue or make any policy or
contract involving a violation of such rate
filings.
Section 366. Notwithstanding any other
provisions of this title, upon the written
application of the insurer, stating his reasons
therefor, filed with and approved by the
Commissioner, a rate in excess of that
provided by a filing otherwise applicable may
be used on any specific risk.
Section 367. Whenever the Commissioner
shall determine, after notice and a hearing, that
the rates charged or filed on any class of risks
are excessive, discriminatory, inadequate or
unreasonable, he shall order that such rates be
appropriately adjusted. For the purpose of
applying the provisions of this section, the
Commissioner may from time to time approve
reasonable classifications of risks for any or all
such classes, having due regard to the past
and prospective loss experience, including
conflagration or catastrophe hazards, if any, to
all other relevant factors and to a reasonable
profit.
Section 368. Nothing contained in this title shall
be construed as requiring any insurer to
become a member of or subscriber to any
rating organization.
Section 369. Agreements may be made among
insurance companies with respect to the
equitable apportionment among them of
insurance which may be afforded applicants
who are in good faith entitled to but are unable
to procure such insurance through ordinary
methods and such insurance companies may
agree among themselves on the use of
reasonable rates and modifications for such
insurance, such agreements and rate
modifications to be subject to the approval of
the Commissioner: Provided, however, That
the provisions of this section shall not be
deemed to apply to workmen’s compensation
insurance.
Section 370. No insurance company doing
business in the Philippines or any agent
thereof, no insurance broker, and no employee
or other representative of any such insurance
company, agent, or broker, shall make,
procure or negotiate any contract of insurance
or agreement as to policy contract, other than
is plainly expressed in the policy or other
written contract issued or to be issued as
evidence thereof, or shall directly or indirectly,
by giving or sharing a commission or in any
manner whatsoever, pay or allow or offer to
pay or allow to the insured or to any employee
of such insured, either as an inducement to the
making of such insurance or after such
insurance has been effected, any rebate from
the premium which is specified in the policy, or
any special favor or advantage in the dividends
or other benefits to accrue thereon, or shall
give or offer to give any valuable consideration
or inducement of any kind, directly or indirectly,
which is not specified in such policy or contract
of insurance; nor shall any such company, or
any agent thereof, as to any policy or contract
of insurance issued, make any discrimination
against any Filipino in the sense that he is
given less advantageous rates, dividends or
other policy conditions or privileges than are
accorded to other nationals because of his
race.
Section 371. No insurance company doing
business in the Philippines, and no officer,
director, or agent thereof, and no insurance
broker or any other person, partnership or
corporation shall issue or circulate or cause or
permit to be issued or circulated any literature,
illustration, circular or statement of any sort
misrepresenting the terms of any policy issued
by any insurance company of the benefits or
advantages promised thereby, or any
misleading estimate of the dividends or share
of surplus to be received thereon, or shall use
any name or title of any policy or class of
policies misrepresenting the true nature
thereof; nor shall any such company or agent
thereof, or any other person, partnership or
corporation make any misleading
representation or incomplete comparison of
policies to any person insured in such
company for the purpose of inducing or tending
to induce such person to lapse, forfeit, or
surrender his said insurance.
Section 372. If the Commissioner, after notice
and hearing, finds that any insurance
company, rating organization, agent, broker or
other person has violated any of the provisions
of this title, it shall order the payment of a fine
not to exceed Twenty-five thousand pesos
(P25,000.00) for each such offense, and shall
immediately suspend or revoke the license
issued to such insurance company, rating
organization, agent, or broker. The issuance,
procurement or negotiation of a single policy or
contract of insurance shall be deemed a
separate offense.
TITLE 8
PROVISION COMMON TO AGENTS,
BROKERS AND ADJUSTERS
Section 373. A license issued to a partnership,
association or corporation to act as an
insurance agent, general agent, insurance
broker, reinsurance broker, or adjuster shall
authorize only the individual named in the
license who shall qualify therefor as though an
individual licensee. The Commissioner shall
charge, and the licensee shall pay, a full
additional license fee as to each respective
individual so named in such license in excess
of one.
Licenses and certificates of registration issued
under the provisions of this chapter may be
renewed by the filing of notices of intention on
forms to be prescribed by the Commissioner
and payment of the fees therefor.
Section 374. The Commissioner, in
consultation with the duly accredited
associations representing the insurance
industry, shall adopt and promulgate a code of
conduct to promote integrity, honesty and
ethical business practices among insurance
agents, distributors and other intermediaries.
TITLE 9
BANCASSURANCE
Section 375. The term bancassurance shall
mean the presentation and sale to bank
customers by an insurance company of its
insurance products within the premises of the
head office of such bank duly licensed by the
Bangko Sentral ng Pilipinas or any of its
branches under such rules and regulations
which the Commissioner and the Bangko
Sentral ng Pilipinas may promulgate. To
engage in bancassurance arrangement, a
bank is not required to have equity ownership
of the insurance company. No insurance
company shall enter into a bancassurance
arrangement unless it possesses all the
requirements as may be prescribed by the
Commissioner and the Bangko Sentral ng
Pilipinas.
No insurance product under this section,
whether life or non-life, shall be issued or
delivered unless in the form previously
approved by the Commissioner.
Section 376. Personnel tasked to present and
sell insurance products within the bank
premises shall be duly licensed by the
Commissioner and shall be subject to the rules
and regulations of this Act.
Section 377. The Commissioner and the
Bangko Sentral ng Pilipinas shall promulgate
rules and regulations to effectively supervise
the business of bancassurance.
CHAPTER V
SECURITY FUND
Section 378. There is hereby created a fund to
be known as the Security Fund which shall be
used in the payment of allowed claims against
an insurance company authorized to transact
business in the Philippines remaining unpaid
by reason of the insolvency of such company.
The said Fund may also be used to reinsure
the policy of the insolvent insurer in any solvent
insurer authorized to do business in the
Philippines as provided in Section 256. The
Fund may likewise be used to pay insured
claims which otherwise would not be
compensable under the provisions of the
policy. No payment from the Security Fund
shall, however, be made to any person who
owns or controls ten percent (10%) or more of
the voting shares of stock of the insolvent
insurer and no payment on any one claim shall
exceed Twenty thousand pesos (P20,000.00).
Section 379. Such Fund shall consist of all
payments made to the Fund by insurance
companies authorized to do business in the
Philippines. Payments made by life insurance
companies shall be treated separately from
those made by non-life insurance companies
and the corresponding fund shall be called Life
Account and Non-Life Account, respectively,
and shall be held and administered as such by
the Commissioner in accordance with the
provisions of this title. The Life Account shall
be utilized exclusively for disbursements that
refer to life insurance companies, while the
Non-Life Account shall be utilized exclusively
for disbursements that refer to non-life
insurance companies.
Section 380. All insurance companies doing
business in the Philippines shall contribute to
the Security Fund, Life or Non-Life Account, as
the case may be, the aggregate amount of Five
million pesos (P5,000,000.00) for each
Account. The contributions of the life insurance
companies and of the non-life insurance
companies shall be in direct proportion to the
ratio between a particular life insurance
company or a particular non-life insurance
company’s net worth and the aggregate net
worth of all life insurance companies or all non-
life insurance companies, as the case may be,
as shown in their latest financial statements
approved by the Commissioner. This
proportion applied to the Five million pesos
(P5,000,000.00) shall be the contribution of a
particular company to the corresponding
Account of the Security Fund.
The amount of Five million pesos
(P5,000,000.00) in each Account shall be in
the form of a revolving trust fund. The
respective contributions of the companies shall
remain as admitted assets in their books and
any disbursement therefrom shall be deducted
proportionately from the contributions of each
company which will be allowed as deductions
for income tax purposes. Any earnings of the
Fund shall be turned over to the contributing
companies in proportion to their contributions.
In the case of disbursements of funds from the
Fund as provided in the foregoing paragraph,
the life and non-life companies, as the case
may be, shall replenish the amount disbursed
in direct proportion to the individual company’s
net worth and the aggregate net worth of the
life or non-life companies, as the case may be.
However, in no case shall the Fund exceed the
aggregate amount of Ten million pesos
(P10,000,000.00), or Five million pesos
(P5,000,000.00) for each Account.
Should the Fund, Life or Non-Life Account, as
the case may be, be inadequate for a
disbursement as provided for, then the Life or
Non-Life companies, as the case may be, shall
contribute to the Fund their respective shares
in the proportion previously mentioned.
Section 381. The Commissioner may adopt,
amend, and enforce all reasonable rules and
regulations necessary for the proper
administration of the Fund and of the Accounts.
In the event any insurer shall fail to make any
payment required by this title, or that any
payment made is incorrect, he shall have full
authority to examine all the books and records
of the insurer for the purpose of ascertaining
the facts and shall determine the correct
amount to be paid and may proceed in any
court of competent jurisdiction to recover for
the benefit of the Fund or of the Account
concerned any sum shown to be due upon
such examination and determination. Any
insurer which fails to make any payment to the
Fund or to the Account concerned when due,
shall thereby forfeit to said Fund or Account
concerned a penalty of five percent (5%) of the
amount determined to be due as provided by
this title, plus one percent (1%) of such amount
for each month of delay or fraction thereof,
after the expiration of the first month of such
delay, but the Commissioner, if satisfied that
the delay was excusable, may remit all or any
part of such penalty. The Commissioner, in his
discretion, may suspend or revoke the
certificate of authority to do business in the
Philippines of any insurance company which
shall fail to comply with this title or to pay any
penalty imposed in accordance therewith.
Section 382. The Accounts created by this title
shall be separate and apart from each other
and from any other fund. The Treasurer of the
Philippines shall be the custodian of the Life
Account and Non-Life Account of the Security
Fund; and all disbursements from any Account
shall be made by the Treasurer of the
Philippines upon vouchers signed by the
Commissioner or his deputy, as hereinafter
provided. The moneys of said Account may be
invested by the Commissioner only in bonds or
other instruments of debt of the Government of
the Philippines or its political subdivisions or
instrumentalities. The Commissioner may sell
any of the securities in which an Account is
invested, if advisable, for its proper
administration or in the best interest of such
Account.
Section 383. Payments from either the Life
Insurance Account or Non-Life Account, as the
case may be, shall be made by the Treasurer
of the Philippines to the Commissioner, upon
the authority of appropriate certificate filed with
him by the Commissioner acting in such
capacity.
Section 384. The Commissioner may, in his
discretion, designate or appoint a duly
authorized representative or representatives to
appear and defend before any court or other
body or official having jurisdiction any or all
actions or proceedings against principals or
assureds on insurance policies or contracts
issued to them where the insurer has become
insolvent or unable to meet its insurance
obligations. The Commissioner shall have, as
of the date of insolvency of such insurer or as
of the date of its inability to meet its insurance
obligations, only the rights which such insurer
would have had if it had not become insolvent
or unable to meet its insurance obligations. For
the purpose of this title, the Commissioner
shall have power to employ such counsel,
clerks and assistants as he may deem
necessary.
Section 385. The expense of administering an
Account shall be paid out of the Account
concerned. The Commissioner shall serve as
administrator of the Fund and of the Accounts
without additional compensation, but may be
allowed and paid from the Account concerned
expenses incurred in the performance of his
duties in connection with said Account. The
compensation of those persons employed by
the Commissioner shall be deemed
administration expense payable from the
Account concerned. The Commissioner shall
include in his annual report to the Secretary of
Finance a statement of the expenses of
administration of the Fund and of the Life
Account and Non-Life Account for the
preceding year.
CHAPTER VI
COMPULSORY MOTOR VEHICLE
LIABILITY INSURANCE
Section 386. For purposes of this chapter:
(a) Motor Vehicle is any vehicle as defined in
Section 3, paragraph (a) of Republic Act No.
4136, otherwise known as the ‘Land
Transportation and Traffic Code’.
(b) Passenger is any fare paying person being
transported and conveyed in and by a motor
vehicle for transportation of passengers for
compensation, including persons expressly
authorized by law or by the vehicle’s operator
or his agents to ride without fare.
(c) Third party is any person other than a
passenger as defined in this section and shall
also exclude a member of the household, or a
member of the family within the second degree
of consanguinity or affinity, of a motor vehicle
owner or land transportation operator, as
likewise defined herein, or his employee in
respect of death, bodily injury, or damage to
property arising out of and in the course of
employment.
(d) Owner or motor vehicle owner means the
actual legal owner of a motor vehicle, in whose
name such vehicle is duly registered with the
Land Transportation Office;
(e) Land transportation operator means the
owner or owners of motor vehicles for
transportation of passengers for
compensation, including school buses.
(f) Insurance policy or Policy refers to a
contract of insurance against passenger and
third-party liability for death or bodily injuries
and damage to property arising from motor
vehicle accidents.
Section 387. It shall be unlawful for any land
transportation operator or owner of a motor
vehicle to operate the same in the public
highways unless there is in force in relation
thereto a policy of insurance or guaranty in
cash or surety bond issued in accordance with
the provisions of this chapter to indemnify the
death, bodily injury, and/or damage to property
of a third-party or passenger, as the case may
be, arising from the use thereof.
Section 388. The Commissioner shall furnish
the Land Transportation Office with a list of
insurance companies authorized to issue the
policy of insurance or surety bond required by
this chapter.
Section 389. The Land Transportation Office
shall not allow the registration or renewal of
registration of any motor vehicle without first
requiring from the land transportation operator
or motor vehicle owner concerned the
presentation and filing of a substantiating
documentation in a form approved by the
Commissioner evidencing that the policy of
insurance or guaranty in cash or surety bond
required by this chapter is in effect.
Section 390. Every land transportation
operator and every owner of a motor vehicle
shall, before applying for the registration or
renewal of registration of any motor vehicle, at
his option, either secure an insurance policy or
surety bond issued by any insurance company
authorized by the Commissioner or make a
cash deposit in such amount as herein
required as limit of liability for purposes
specified in Section 387.
(a) In the case of a land transportation
operator, the insurance guaranty in cash or
surety bond shall cover liability for death or
bodily injuries of third-parties and/or
passengers arising out of the use of such
vehicle in the amount not less than Twelve
thousand pesos (P12,000.00) per passenger
or third-party and an amount, for each of such
categories, in any one accident of not less than
that set forth in the following scale:
(1) Motor vehicles with an authorized capacity
of twenty-six (26) or more passengers: Fifty
thousand pesos (P50,000.00);
(2) Motor vehicles with an authorized capacity
of from twelve (12) to twenty-five (25)
passengers: Forty thousand pesos
(P40,000.00);
(3) Motor vehicles with an authorized capacity
of from six (6) to eleven (11) passengers: Thirty
thousand pesos (P30,000.00);
(4) Motor vehicles with an authorized capacity
of five (5) or less passengers: Five thousand
pesos (P5,000.00) multiplied by the authorized
capacity.
Provided, however, That such cash deposit
made to, or surety bond posted with, the
Commissioner shall be resorted to by him in
cases of accidents the indemnities for which to
third-parties and/or passengers are not settled
accordingly by the land transportation operator
and, in that event, the said cash deposit shall
be replenished or such surety bond shall be
restored within sixty (60) days after impairment
or expiry, as the case may be, by such land
transportation operator, otherwise, he shall
secure the insurance policy required by this
chapter. The aforesaid cash deposit may be
invested by the Commissioner in readily
marketable government bonds, and/or
securities.
(b) In the case of an owner of a motor vehicle,
the insurance or guaranty in cash or surety
bond shall cover liability for death or injury to
third-parties in an amount not less than that set
forth in the following scale in any one accident:
(1) Private Cars
(i) Bantam: Twenty thousand pesos
(P20,000.00);
(ii) Light: Twenty thousand pesos
(P20,000.00); and
(iii) Heavy: Thirty thousand pesos
(P30,000.00).
(2) Other Private Vehicles
(i) Tricycles, motorcycles and scooters: Twelve
thousand pesos (P12,000.00);
(ii) Vehicles with an unladen weight of 2,600
kilos or less: Twenty thousand pesos
(P20,000.00);
(iii) Vehicles with an unladen weight of
between 2,601 kilos and 3,930 kilos: Thirty
thousand pesos (P30,000.00); and
(iv) Vehicles with an unladen weight over 3,930
kilos: Fifty thousand pesos (P50,000.00).
The Commissioner may, if warranted, set forth
schedule of indemnities for the payment of
claims for death or bodily injuries with the
coverages set forth herein.
Section 391. Any claim for death or injury to
any passenger or third-party pursuant to the
provisions of this chapter shall be paid without
the necessity of proving fault or negligence of
any kind: Provided, That for purposes of this
section:
(a) The total indemnity in respect of any person
shall not be less than Fifteen thousand pesos
(P15,000.00);
(b) The following proofs of loss, when
submitted under oath, shall be sufficient
evidence to substantiate the claim:
(1) Police report of accident; and
(2) Death certificate and evidence sufficient to
establish the proper payee; or
(3) Medical report and evidence of medical or
hospital disbursement in respect of which
refund is claimed;
(c) Claim may be made against one motor
vehicle only. In the case of an occupant of a
vehicle, claim, shall lie against the insurer of
the vehicle in which the occupant is riding,
mounting or dismounting from. In any other
case, claim shall lie against the insurer of the
directly offending vehicle. In all cases, the right
of the party paying the claim to recover against
the owner of the vehicle responsible for the
accident shall be maintained.
Section 392. No land transportation operator or
owner of motor vehicle shall be unreasonably
denied the policy of insurance or surety bond
required by this chapter by the insurance
companies authorized to issue the same,
otherwise, the Land Transportation Office shall
require from said land transportation operator
or owner of the vehicle, in lieu of a policy of
insurance or surety bond, a certificate that a
cash deposit has been made with the
Commissioner in such amount required as
limits of indemnity in Section 390 to answer for
the passenger and/or third-party liability of
such land transportation operator or owner of
the vehicle.
No insurance company may issue the policy of
insurance or surety bond required under this
chapter unless so authorized under existing
laws.
The authority to engage in the casualty and/or
surety lines of business of an insurance
company that refuses to issue or renew,
without just cause, the insurance policy or
surety bond therein required shall be
withdrawn immediately.
Section 393. No cancellation of the policy shall
be valid unless written notice thereof is given
to the land transportation operator or owner of
the vehicle and to the Land Transportation
Office at least fifteen (15) days prior to the
intended effective date thereof. Upon receipt of
such notice, the Land Transportation Office,
unless it receives evidence of a new valid
insurance or guaranty in cash or surety bond
as prescribed in this chapter, or an
endorsement of revival of the cancelled one,
shall order the immediate confiscation of the
plates of the motor vehicle covered by such
cancelled policy. The same may be reissued
only upon presentation of a new insurance
policy or that a guaranty in cash or surety bond
has been made or posted with the
Commissioner and which meets the
requirements of this chapter, or an
endorsement or revival of the cancelled one.
Section 394. If the cancellation of the policy or
surety bond is contemplated by the land
transportation operator or owner of the vehicle,
he shall, before the policy or surety bond
ceases to be effective, secure a similar policy
of insurance or surety bond to replace the
policy or surety bond to be cancelled or make
a cash deposit in sufficient amount with the
Commissioner, and without any gap, file the
required documentation with the Land
Transportation Office, and notify the insurance
company concerned of the cancellation of its
policy or surety bond.
Section 395. In case of change of owner ship
of a motor vehicle, or change of the engine of
an insured vehicle, there shall be no need of
issuing a new policy until the next date of
registration or renewal of registration of such
vehicle, and: Provided, That the insurance
company shall agree to continue the policy,
such change of ownership or such change of
the engine shall be indicated in a
corresponding endorsement by the insurance
company concerned, and a signed duplicate of
such endorsement shall, within a reasonable
time, be filed with the Land Transportation
Office.
Section 396. In the settlement and payment of
claims, the indemnity shall not be availed of by
any accident victim or claimant as an
instrument of enrichment by reason of an
accident, but as an assistance or restitution
insofar as can fairly be ascertained.
Section 397. Any person having any claim
upon the policy issued pursuant to this chapter
shall, without any unnecessary delay, present
to the insurance company concerned a written
notice of claim setting forth the nature, extent
and duration of the injuries sustained as
certified by a duly licensed physician. Notice of
claim must be filed within six (6) months from
the date of accident, otherwise, the claim shall
be deemed waived. Action or suit for recovery
of damage due to loss or injury must be
brought, in proper cases, with the
Commissioner or the courts within one (1) year
from denial of the claim, otherwise, the
claimant’s right of action shall prescribe.
Section 398. The insurance company
concerned shall forthwith ascertain the truth
and extent of the claim and make payment
within five (5) working days after reaching an
agreement. If no agreement is reached, the
insurance company shall pay only the no-fault
indemnity provided in Section 391 without
prejudice to the claimant from pursuing his
claim further, in which case, he shall not be
required or compelled by the insurance
company to execute any quit claim or
document releasing it from liability under the
policy of insurance or surety bond issued.
In case of any dispute in the enforcement of the
provisions of any policy issued pursuant to this
chapter, the adjudication of such dispute shall
be within the original and exclusive jurisdiction
of the Commissioner, subject to the limitations
provided in Section 439.
Section 399. It shall be unlawful for a land
transportation operator or owner of motor
vehicle to require his or its drivers or other
employees to contribute in the payment of
premiums.
Section 400. No government office or agency
having the duty of implementing the provisions
of this chapter nor any official or employee
thereof shall act as agent in procuring the
insurance policy or surety bond provided for
herein. The commission of an agent procuring
the said policy or bond shall in no case exceed
ten percent (10%) of the amount of the
premiums therefor.
Section 401. Any land transportation operator
or owner of motor vehicle or any other person
violating any of the provisions of the preceding
sections shall be punished by a fine of not less
than Five hundred pesos (P500.00) and/or
imprisonment for not more than six (6) months.
The violation of Section 390 by a land
transportation operator shall be a sufficient
cause for the revocation of the certificate of
public convenience issued by the Land
Transportation Franchising and Regulatory
Board covering the vehicle concerned.
Section 402. Whenever any violation of the
provisions of this chapter is committed by a
corporation or association, or by a government
office or entity, the executive officer or officers
of said corporation, association or government
office or entity who shall have knowingly
permitted, or failed to prevent, said violation
shall be held liable as principals.
CHAPTER VII
MUTUAL BENEFIT ASSOCIATIONS AND
TRUSTS FOR CHARITABLE USES
TITLE 1
MUTUAL BENEFIT ASSOCIATIONS
Section 403. Any society, association or
corporation, without capital stock, formed or
organized not for profit but mainly for the
purpose of paying sick benefits to members, or
of furnishing financial support to members
while out of employment, or of paying to
relatives of deceased members of fixed or any
sum of money, irrespective of whether such
aim or purpose is carried out by means of fixed
dues or assessments collected regularly from
the members, or of providing, by the issuance
of certificates of insurance, payment of its
members of accident or life insurance benefits
out of such fixed and regular dues or
assessments, but in no case shall include any
society, association, or corporation with such
mutual benefit features and which shall be
carried out purely from voluntary contributions
collected not regularly and/or no fixed amount
from whomsoever may contribute, shall be
known as a mutual benefit association within
the intent of this Code.
Any society, association, or corporation
principally organized as a labor union shall be
governed by the Labor Code notwithstanding
any mutual benefit feature provisions in its
charter as incident to its organization.
In no case shall a mutual benefit association be
organized and authorized to transact business
as a charitable or benevolent organization, and
whenever it has this feature as incident to its
existence, the corresponding charter provision
shall be revised to conform with the provision
of this section. Mutual benefit association,
already licensed to transact business as such
on the date this Code becomes effective,
having charitable or benevolent feature shall
abandon such incidental purpose upon
effectivity of this Code if they desire to continue
operating as such mutual benefit associations.
Section 404. A mutual benefit association,
before it may transact as such, must first
secure a license from the Commissioner. The
application for such license shall be filed with
the Commissioner together with certified true
copies of the articles of incorporation or the
constitution and bylaws of the association, and
all amendments thereto, and such other
documents or testimonies as the
Commissioner may require.
No license shall be granted to a mutual benefit
association until the Commissioner shall have
been satisfied by such examination as he may
make and such evidence as he may require
that the association is qualified under existing
laws to operate and transact business as such.
The Commissioner may refuse to issue a
license to any mutual benefit association if, in
his judgment, such refusal will best promote
the interest of the members of such association
and of the people of this country. Any license
issued shall expire on the last day of December
of the third year following its issuance and,
upon proper application, may be renewed if the
association is continuing to comply with
existing laws, rules and regulations, orders,
instructions, rulings and decisions of the
Commissioner. Every association receiving
any such license shall be subject to the
supervision of the Commissioner: Provided,
That no such license shall be granted to any
such association if such association has no
actuary.
Section 405. No mutual benefit association
shall be issued a license to operate as such
unless it has constituted and established a
Guaranty Fund by depositing with the
Commissioner an initial minimum amount of
Five million pesos (P5,000,000.00) in cash, or
in government securities with a total value
equal to such amount, to answer for any valid
benefit claim of any of its members.
All moneys received by the Commissioner for
this purpose must be deposited by him in
interest-bearing deposits with any bank or
banks authorized to transact business in the
Philippines for the account of the particular
association constituting the Guaranty Fund.
Any accrual to such fund, be it interest earned
or dividend additions on moneys or securities
so deposited, may, with the prior approval of
the Commissioner, be withdrawn by the
association if there is no pending benefit claim
against it, including interest thereon or dividend
additions thereto.
The Commissioner, prior to or after licensing a
mutual benefit association, may require such
association to increase its Guaranty Fund from
the initial minimum amount required to an
amount equal to the capital investment
required of an existing domestic insurance
company under Section 209 of this Code.
Section 406. Every mutual benefit association
licensed to do business as such shall issue
membership certificates to its members
specifying the benefits to which such members
are entitled.
Such certificates, together with the articles of
incorporation of the association or its
constitution and bylaws, and all existing laws
as may be pertinent shall constitute the
agreement, as of the date of its issuance,
between the association and the member. The
membership certificate shall be in a form
previously approved by the Commissioner.
Section 407. A mutual benefit association may,
by reinsurance agreement, cede in whole or in
part any individual risk or risks under
certificates of insurance issued by it, only to a
life insurance company authorized to transact
business or to a professional reinsurer
authorized to accept life risks in the
Philippines: Provided, That a copy of the draft
of such reinsurance agreement shall be
submitted to the Commissioner for his
approval. The association may take credit for
the reserves on such ceded risks to the extent
reinsured.
Section 408. The constitution or bylaws of a
mutual benefit association must distinctly state
the purpose for which dues and/or
assessments are made and collected and the
portion thereof which may be used for
expenses.
Death benefit and other relief funds shall be
created and used exclusively for paying
benefits due the members under their
respective membership certificates. A general
fund shall likewise be created and used for
expenses of administration of the association.
A mutual benefit association shall only
maintain free and unassigned surplus of not
more than twenty percent (20%) of its total
liabilities as verified by the Commissioner. Any
amount in excess shall be returned to the
members by way of dividends, enhancing the
equity value or providing benefits in kind and
other relevant services. In addition, subject to
the approval of the Commissioner, a mutual
benefit association may allocate a portion for
capacity building and research and
development such as developing new products
and services, upgrading and improving
operating systems and equipment and
continuing member education.
Section 409. Every outstanding membership
certificate must have an equity value
equivalent to at least fifty percent (50%) of the
total contributions collected thereon. The
equity value only applies to basic life insurance
product and excludes optional products.
Section 410. Every mutual benefit association
must accumulate and maintain, out of the
periodic dues collected from its members,
sufficient reserves for the payment of claims or
obligations for which it shall hold funds in
securities satisfactory to the Commissioner
consisting of bonds of the Government of the
Philippines, or any of its political subdivisions
and instrumentalities, or in such other good
securities as may be approved by the
Commissioner.
The reserve liability shall be established in
accordance with actuarial procedures and shall
be approved by the Commissioner.
The articles of incorporation or the constitution
and bylaws of a mutual benefit association
must provide that if its reserve as to all or any
class of certificates becomes impaired, its
board of directors or trustees may require that
there shall be paid by the members to the
association the amount of the members’
equitable proportion of such deficiency as
ascertained by said board and that if the
payment be not made it shall stand as an
indebtedness against the membership
certificates of the defaulting members and
draw interest not to exceed five percent (5%)
per annum compounded annually.
Section 411. A mutual benefit association may
invest such portion of its funds as shall not be
required to meet pending claims and other
obligations in any of the classes of investments
or types of securities in which life insurance
companies doing business in the Philippines
may invest.
It may also grant loans to members on the
security of a pledge or chattel mortgage of
personal properties of the borrowers, or in the
absence thereof, on the security of the
membership certificate of the borrowing
members, in which event such loan shall
become a first lien on the proceeds thereof.
Section 412. The Commissioner or any of his
duly designated representatives, shall have the
power of visitation, audit and examination into
the affairs, financial condition, and methods of
doing business of all mutual benefit
associations, and he shall cause such
examination to be made at least once every
two (2) years or whenever it may be deemed
proper and necessary. Free access to the
books, records and documents of the
association shall be accorded to the
Commissioner, or to his representatives, in
such manner that the Commissioner or his
representatives may readily verify or determine
the true affairs, financial condition, and method
of doing business of such association. In the
course of such examination, the Commissioner
or his duly designated representatives shall
have authority to administer oaths and take
testimony or other evidence on any matter
relating to the affairs of the association.
All minutes of the proceedings of the board of
directors or trustees of the association, and
those of the regular or special meetings of the
members, shall be taken, and a copy thereof,
in English or in Pilipino, shall be submitted to
the Commissioner’s representatives or
examiners in the course of such examination.
A copy of the findings of such examination,
together with the recommendations of the
Commissioner, shall be furnished the
association for its information and compliance,
and the same shall be taken up immediately in
the meetings of the board of directors or
trustees and of the members of the
association.
Section 413. Every mutual benefit association
shall, annually on or before the thirtieth day of
April of each year, render to the Commissioner
an annual statement in such form and detail as
may be prescribed by the Commissioner,
signed and sworn to by the president,
secretary, treasurer, and actuary of the
association, showing the exact condition of its
affairs on the preceding thirty-first day of
December.
Section 414. No money, aid or benefit to be
paid, provided or tendered by any mutual
benefit association, shall be liable to
attachment, garnishment, or other process, or
be seized, taken, appropriated, or applied by
any legal or equitable process to pay any debt
or liability of a member or beneficiary, or any
other person who may have a right thereunder,
either before or after payment.1âwphi1
Section 415. Any member of a mutual benefit
association shall have the right at all times to
change the beneficiary or beneficiaries or add
another beneficiary or other beneficiaries in
accordance with the rules and regulations of
the association unless he has expressly
waived this right in the membership certificate.
Every association may, under such rules as it
may adopt, limit the scope of beneficiaries and
provide that no beneficiary shall have or obtain
any vested interest in the proceeds of any
certificate until the certificate has become due
and payable under the terms of the
membership certificate.
Section 416. Any chapter affiliate
independently licensed as a mutual benefit
association may consolidate or merge with any
other similar chapter affiliate or with the mother
association.
Section 417. Any mutual benefit association
may be converted into and licensed as a
mutual life insurance company by complying
with the requirements of the pertinent
provisions of this Code and submitting the
specific plan for such conversion to the
Commissioner for his approval. Such plan, as
approved, shall then be submitted to the
members either in the regular meeting or in a
special meeting called for the purpose for their
adoption. The affirmative vote of at least two-
thirds (2/3) of all the members shall be
necessary in order to consider such plan as
adopted.
No such conversion shall take effect unless
and until approved by the Commissioner.
Section 418. No mutual benefit association
shall be dissolved without first notifying the
Commissioner and furnishing him with a
certified copy of the resolution authorizing the
dissolution, duly adopted by the affirmative
vote of two-thirds (2/3) of the members at a
meeting called for that purpose, the financial
statements as of the date of the resolution, and
such other papers or documents as may be
required by the Commissioner.
No dissolution shall proceed until and unless
approved by the Commissioner and all
proceedings in connection therewith shall be
witnessed and attested by his duly designated
representative.
No mutual benefit association shall be officially
declared as dissolved until after the
Commissioner so certifies that all outstanding
claims against the association have been duly
settled and liquidated.
Section 419. The Commissioner shall, after
notice and hearing, have the power either to
suspend or revoke the license issued to a
mutual benefit association if he finds that the
association has:
(a) Failed to comply with any provision of this
Code;
(b) Failed to comply with any other law or
regulation obligatory upon it;
(c) Failed to comply with any order, ruling,
instruction, requirement or recommendation of
the Commissioner;
(d) Exceeded its power to the prejudice of its
members;
(e) Conducted its business fraudulently or
hazardously;
(f) Rendered its affairs and condition to one of
insolvency; or
(g) Failed to carry out its aims and purposes for
which it was organized due to any cause.
After receipt of the order from the
Commissioner suspending or revoking the
license, the association must immediately
exert efforts to remove such cause or causes
which brought about the order and, upon
proper showing, may apply with the
Commissioner for the lifting of the order and
restoration or revival of the license so revoked
or suspended.
Section 420. For failure to remove such cause
or causes which brought about the suspension
or revocation of the license of a mutual benefit
association, the Commissioner shall apply
under this Code for an order from the proper
court to liquidate such association.
The provisions of Titles 14 and 15, Chapter III,
pertaining to the appointment of a conservator
and proceedings upon insolvency of an
insurance company shall, insofar as
practicable, apply to mutual benefit
associations.
Section 421. To secure the enforcement of any
provision under this title, the Commissioner
may issue such rules, rulings, instructions,
orders and circulars.
Section 422. The violation of any provision of
this title shall subject the person violating or the
officer of the association responsible therefor
to a fine of not less than Ten thousand pesos
(P10,000.00), or imprisonment of not
exceeding three (3) years, or both such fine
and imprisonment, at the discretion of the
court.
Section 423. All provisions of this Code
governing life insurance companies and such
other provisions whenever practicable and
necessary, shall be applicable to mutual
benefit associations.
TITLE 2
TRUSTS FOR CHARITABLE USES
Section 424. The term trust for charitable uses,
within the intent of this Code, shall include, all
the real or personal properties or funds, as well
as those acquired with the fruits or income
therefrom or in exchange or substitution
thereof, given to or received by any person,
corporation, association, foundation, or entity,
except the National Government, its
instrumentalities or political subdivisions, for
charitable, benevolent, educational, pious,
religious, or other uses for the benefit of the
public at large or a particular portion thereof or
for the benefit of an indefinite number of
persons.
Section 425. The term trustee shall include any
individual, corporation, association,
foundation, or entity, except the National
Government, its instrumentalities or political
subdivisions, in charge of, or acting for, or
concerned with the administration of, the trust
referred to in the section immediately
preceding and with the proper application of
trust property.
Section 426. The term trust property shall
include all real or personal properties or funds
pertaining to the trust as well as those acquired
with the fruits or income therefrom or in
exchange or substitution thereof.
Section 427. All trustees shall, before entering
in the performance of the duties of their trust,
obtain a certificate of registration from the
Commissioner. The registration shall expire on
December 31 of the third year following its
issuance unless it is renewed.
All provisions of this Code governing mutual
benefit associations and such other provisions
herein, whenever practicable and necessary,
shall be applicable to trusts for charitable uses.
Section 428. The treasurer of a charitable trust
shall file a fidelity bond in the amount
commensurate with the value of the trust
property in his custody, as may be determined
by the Commissioner.
CHAPTER VIII
TRUST BUSINESS IN GENERAL
Section 429. An insurance company may
engage in limited trust business, consisting of
managing funds pertaining only to retirement
and pre-need plans, provided it has secured a
license to do so from the Bangko Sentral ng
Pilipinas. This trust business shall be separate
and distinct from the general business of the
insurance company and shall be subject to
rules and regulations as may be promulgated
by the Bangko Sentral ng Pilipinas in
consultation with the Commissioner.
CHAPTER IX
REGISTRATION, RESPONSIBILITIES AND
OVERSIGHT OF SELF-REGULATORY
ORGANIZATIONS
Section 430. The Commissioner shall have the
power to register as a self-regulatory
organization, or otherwise grant licenses, and
to regulate, supervise, examine, suspend or
otherwise discontinue, as a condition for the
operation of organizations whose operations
are related to or connected with the insurance
market such as, but not limited to, associations
of insurance companies, whether life or non-
life, reinsurers, actuaries, agents, brokers,
dealers, mutual benefit associations, trusts,
rating agencies, and other persons regulated
by the Commissioner, which are engaged in
the business regulated by this Code.
The Commissioner may prescribe rules and
regulations which are necessary or appropriate
in the public interest or for the protection of
investors to govern self-regulatory
organizations and other organizations licensed
or regulated pursuant to the authority granted
hereunder including, but not limited to, the
requirement of cooperation within and among
all participants in the insurance market to
ensure transparency and facilitate exchange of
information.
Section 431. An association cannot be
registered as a self-regulatory organization
unless the Commissioner determines that:
(a) The association is so organized and has the
capacity to be able to carry out the purposes of
this Code and to comply with, and to enforce
compliance by its members and persons
associated with its members, with the
provisions of this Code, the rules and
regulations thereunder, and the rules of the
association.
(b) The rules of the association,
notwithstanding anything in the Corporation
Code to the contrary, provide the following:
(1) Qualifications and the disqualifications on
membership of the association;
(2) A fair representation of its members to
serve on the board of directors of the
association and the administration of its affairs,
and that any natural person associated with a
juridical entity that is a member shall also be
deemed to be a member for this purpose;
(3) The president of the association and at
least two (2) independent directors as
members of the board of directors of the
association;
(4) Equitable allocation of reasonable dues,
fees, and other charges among members and
other persons using any facility or system
which the association operates or controls;
(5) The prevention of fraudulent and
manipulative acts and practices to protect the
insuring public and the promotion of just and
equitable principles of business;
(6) Members and persons associated with its
members subject to discipline for violation of
any provision of this Code, the rules or
regulations thereunder, or the rules of the
association;
(7) Fair procedure for the disciplining of
members and persons associated with
members; and
(8) The prohibition or limitation of access to
services offered by the association or a
member thereof.
Section 432. A self-regulatory organization
may examine and verify the qualifications of an
applicant to become a member in accordance
with procedures established by the rules of the
association.
A self-regulatory organization shall deny
membership or condition the membership of an
entity, if it does not meet the standards of
financial responsibility, operational capability,
training, experience, or competence that are
prescribed by the rules of the association; or
has engaged, and there is a reasonable
likelihood it will again engage, in acts or
practices inconsistent with just and equitable
principles of fair trade.
A self-regulatory organization may deny
membership to an entity not engaged in a type
of business in which the rules of the
association require members to be engaged.
Section 433. Upon the filing of an application
for registration as a self-regulatory
organization under this title, the Commissioner
shall have ninety (90) days within which to
either grant registration or institute a
proceeding to determine whether registration
should be denied. In the event proceedings are
instituted, the Commissioner shall have two
hundred seventy (270) days within which to
conclude such proceedings at which time he
shall, by order, grant or deny such registration.
Section 434. Every self-regulatory organization
shall comply with the provisions of this Code,
the rules and regulations thereunder, and its
own rules, and enforce compliance therewith
by its members, persons associated with its
members or its participants, notwithstanding
any provision of the Corporation Code to the
contrary.
Section 435. Each self-regulatory organization
shall submit to the Commissioner for prior
approval any proposed rule or amendment
thereto, together with a concise statement of
the reason and effect of the proposed
amendment.
Within sixty (60) days after submission of a
proposed amendment, the Commissioner
shall, by order, approve the proposed
amendment. Otherwise, the same may be
made effective by the self-regulatory
organization.
In the event of an emergency requiring action
for the protection of the insuring public, a self-
regulatory organization may put a proposed
amendment into effect summarily: Provided,
however, That a copy of the same shall be
immediately submitted to the Commissioner.
The Commissioner is further authorized, if after
making appropriate request in writing to a self-
regulatory organization that such organization
effect on its own behalf specified changes in its
rules and practices and, after due notice and
hearing, it determines that such changes have
not been effected, and that such changes are
necessary, by rule or regulation or by order,
may alter, abrogate or supplement the rules of
such self-regulatory organization insofar as
necessary or appropriate to effect such
changes in respect of such matters as:
(a) Safeguards in respect of the financial
responsibility of members and adequate
provision against the evasion of financial
responsibility through the use of corporate
forms or special partnerships;
(b) The supervision of market practices;
(c) The manner, method and place of soliciting
business;
(d) The fixing of reasonable rates of fees,
interest, listing and other charges, but not rates
of commission; and self-regulatory
organization; and
(e) The supervision, auditing and disciplining of
members.
In addition to the general powers of the
Commissioner over the entities under
supervision, the Commissioner, after due
notice and hearing, is authorized, in the public
interest and to protect the insuring public:
(1) To suspend for a period not exceeding
twelve (12) months or to revoke the registration
of a self-regulatory organization, or to censure
or impose limitations on the activities, functions
and operations of such self-regulatory
organization, if the Commission finds that such
a self-regulatory organization has willfully
violated or is unable to comply with any
provision of this Code or of the rules and
regulations thereunder, or its own rules, or has
failed to enforce compliance therewith by a
member of, person associated with a member,
or a participant in such self-regulatory
organization;
(2) To expel from a self-regulatory organization
any member thereof or any participant therein
who is found to have willfully violated any
provision of this Code or suspend for a period
not exceeding twelve (12) months for violation
of any provision of this Code or any other law
administered by the Commission, or the rules
and regulations thereunder, or effected,
directly or indirectly, any transaction for any
person who, such member or participant had
reason to believe, was violating in respect of
such transaction any of such provisions; and
(3) To remove from office or censure any
officer or director of a self-regulatory
organization if it finds that such officer or
director has violated any provision of this
Code, any other law administered by the
Commissioner, the rules or regulations
thereunder and the rules of such self-
regulatory organization, or has abused his
authority, or without reasonable justification or
excuse has failed to enforce compliance with
any of such provisions.
Section 436. (a) A self-regulatory organization
is authorized to discipline a member of or
participant in such self-regulatory organization,
or any person associated with a member,
including suspending or expelling such
member or participant, or suspending or
barring such person from being associated
with a member, if engaged in acts or practices
inconsistent with just and equitable principles
of fairness or in willful violation of any provision
of this Code, any other law administered by the
Commission, the rules or regulations
thereunder, or the rules of the self-regulatory
organization. In any disciplinary proceeding by
a self-regulatory organization (other than a
summary proceeding pursuant to paragraph
(b) of this section) the self-regulatory
organization shall bring specific charges,
provide notice to the person charged, afford
the person charged with an opportunity to
defend against the charges, and keep a record
of the proceedings. A determination to impose
a disciplinary sanction shall be supported by a
written statement of the offense, a summary of
the evidence presented and a statement of the
sanction imposed.
(b) A self-regulatory organization may
summarily:
(1) Suspend a member, participant or person
associated with a member who has been or is
expelled or suspended from any other self-
regulatory organization; or
(2) Suspend a member who the self-regulatory
organization finds to be in such financial or
operating difficulty that the member or
participant cannot be permitted to continue to
do business as a member with safety to
investors, creditors, other members,
participants or the self-regulatory
organization: Provided, That the self-
regulatory organization immediately notifies
the Commission of the action taken. Any
person aggrieved by a summary action
pursuant to this paragraph shall be promptly
afforded an opportunity for a hearing by the
association in accordance with the preceding
paragraph. The Commissioner, by order, may
stay a summary action on his own or upon
application by any person aggrieved thereby, if
the Commissioner determines summarily or
after due notice and hearing (which hearing
may consist solely of the submission of
affidavits or presentation of oral arguments),
that a stay is consistent with the public interest
and the protection of the insuring public.
(c) A self-regulatory organization shall
promptly notify the Commission of any
disciplinary sanction on any member thereof or
participant therein, any denial of membership
or participation in such organization, or the
imposition of any disciplinary sanction on a
person associated with a member or a bar of
such person from becoming so associated.
Within thirty (30) days after such notice, any
aggrieved person may appeal to the
Commissioner from, or the Commissioner on
its own motion within such period, may institute
review of, the decision of the self-regulatory
organization, at the conclusion of which, after
due notice and hearing (which may consist
solely of review of the record before the self-
regulatory organization), the Commissioner
shall affirm, modify or set aside the sanction. In
such proceeding, the Commissioner shall
determine whether the aggrieved person has
engaged or omitted to engage in the acts and
practices as found by the self-regulatory
organization, whether such acts and practices
constitute willful violations of this Code, any
other law administered by the Commission, the
rules or regulations thereunder, or the rules of
the self-regulatory organization as specified by
such organization, whether such provisions
were applied in a manner consistent with the
purposes of this Code, and whether, with due
regard for the public interest and the protection
of investors, the sanction is excessive or
oppressive.
CHAPTER X
THE INSURANCE COMMISSIONER
TITLE 1
ADMINISTRATIVE AND ADJUDICATORY
POWERS
Section 437. The Insurance Commissioner
shall be appointed by the President of the
Republic of the Philippines for a term of six (6)
years without reappointment and who shall
serve as such until the successor shall have
been appointed and qualified. If the Insurance
Commissioner is removed before the
expiration of his term of office, the reason for
the removal must be published.
The Insurance Commissioner shall have the
duty to see that all laws relating to insurance,
insurance companies and other insurance
matters, mutual benefit associations, and
trusts for charitable uses are faithfully executed
and to perform the duties imposed upon him by
this Code, and shall, notwithstanding any
existing laws to the contrary, have sole and
exclusive authority to regulate the issuance
and sale of variable contracts as defined in
Section 238 hereof and to provide for the
licensing of persons selling such contracts, and
to issue such reasonable rules and regulations
governing the same.
The Commissioner may issue such rulings,
instructions, circulars, orders and decisions as
may be deemed necessary to secure the
enforcement of the provisions of this Code, to
ensure the efficient regulation of the insurance
industry in accordance with global best
practices and to protect the insuring public.
Except as otherwise specified, decisions made
by the Commissioner shall be appealable to
the Secretary of Finance.
In addition to the foregoing, the Commissioner
shall have the following powers and functions:
(a) Formulate policies and recommendations
on issues concerning the insurance industry,
advise Congress and other government
agencies on all aspects of the insurance
industry and propose legislation and
amendments thereto;
(b) Approve, reject, suspend or revoke licenses
or certificates of registration provided for by
this Code;
(c) Impose sanctions for the violation of laws
and the rules, regulations and orders issued
pursuant thereto;
(d) Prepare, approve, amend or repeal rules,
regulations and orders, and issue opinions and
provide guidance on and supervise compliance
with such rules, regulations and orders;
(e) Enlist the aid and support of, and/or
deputize any and all enforcement agencies of
the government in the implementation of its
powers and functions under this Code;
(f) Issue cease and desist orders to prevent
fraud or injury to the insuring public;
(g) Punish for contempt of the Commissioner,
both direct and indirect, in accordance with the
pertinent provisions of and penalties
prescribed by the Rules of Court;
(h) Compel the officers of any registered
insurance corporation or association to call
meetings of stockholders or members thereof
under its supervision;
(i) Issue subpoena duces tecum and summon
witnesses to appear in any proceeding of the
Commission and, in appropriate cases, order
the examination, search and seizure of all
documents, papers, files and records, tax
returns, and books of accounts of any entity or
person under investigation as may be
necessary for the proper disposition of the
cases before it, subject to the provisions of
existing laws;
(j) Suspend or revoke, after proper notice and
hearing, the license or certificate of authority of
any entity or person under its regulation, upon
any of the grounds provided by law;
(k) Conduct an examination to determine
compliance with laws and regulations if the
circumstances so warrant as determined by
appropriate rules and regulations;
(l) Investigate not oftener than once a year from
the last date of examination to determine
whether an institution is conducting its
business on a safe and sound basis: Provided,
That, the deficiencies/irregularities found by or
discovered by an audit shall be immediately
addressed;
(m) Inquire into the solvency and liquidity of the
institutions under its supervision and enforce
prompt corrective action;
(n) To retain and utilize, in addition to its annual
budget, all fees, charges and other income
derived from the regulation of insurance
companies and other supervised persons or
entities;
(o) To fix and assess fees, charges and
penalties as the Commissioner may find
reasonable in the exercise of regulation; and
(p) Exercise such other powers as may be
provided by law as well as those which may be
implied from, or which are necessary or
incidental to the express powers granted the
Commission to achieve the objectives and
purposes of this Code.
The Commission shall indemnify the
Commissioner, Deputy Commissioner, and
other officials of the Commission, including
personnel performing supervision and
examination functions, for all costs and
expenses reasonably incurred by such
persons in connection with any civil or criminal
actions, suits or proceedings to which they may
be made a party to by the reason of the
performance of their duties and functions,
unless they are finally adjudged in such
actions, suits or proceedings to be liable for
negligence or misconduct.
In the event of settlement or compromise,
indemnification shall be provided only in
connection with such matters covered by the
settlement as to which the Commission is
advised by external counsel that the persons to
be indemnified did not commit any negligence
or misconduct:
The costs and expenses incurred in defending
the aforementioned action, suit or proceeding
may be paid by the Commission in advance of
the final disposition of such action, suit or
proceeding upon receipt of an undertaking by
or on behalf of the Commissioner, Deputy
Commissioner, officer or employee to repay
the amount advanced should it ultimately be
determined by the Commission that the person
is not entitled to be indemnified.
Section 438. In addition to the administrative
sanctions provided elsewhere in this Code, the
Insurance Commissioner is hereby authorized,
at his discretion, to impose upon insurance
companies, their directors and/or officers
and/or agents, for any willful failure or refusal
to comply with, or violation of any provision of
this Code, or any order, instruction, regulation,
or ruling of the Insurance Commissioner, or
any commission or irregularities, and/or
conducting business in an unsafe or unsound
manner as may be determined by the
Insurance Commissioner, the following:
(a) Fines not less than Five thousand pesos
(P5,000.00) and not more than Two hundred
thousand pesos (P200,000.00); and
(b) Suspension, or after due hearing, removal
of directors and/or officers and/or agents.
Section 439. The Commissioner shall have the
power to adjudicate claims and complaints
involving any loss, damage or liability for which
an insurer may be answerable under any kind
of policy or contract of insurance, or for which
such insurer may be liable under a contract of
suretyship, or for which a reinsurer may be
sued under any contract of reinsurance it may
have entered into; or for which a mutual benefit
association may be held liable under the
membership certificates it has issued to its
members, where the amount of any such loss,
damage or liability, excluding interest, cost and
attorney’s fees, being claimed or sued upon
any kind of insurance, bond, reinsurance
contract, or membership certificate does not
exceed in any single claim Five million pesos
(P5,000,000.00).
The power of the Commissioner does not
cover the relationship between the insurance
company and its agents/brokers but is limited
to adjudicating claims and complaints filed by
the insured against the insurance company.
The Commissioner may authorize any officer
or group of officers under him to conduct
investigation, inquiry and/or hearing and
decide claims and he may issue rules
governing the conduct of adjudication and
resolution of cases. The Rules of Court shall
have suppletory application.
The party filing an action pursuant to the
provisions of this section thereby submits his
person to the jurisdiction of the Commissioner.
The Commissioner shall acquire jurisdiction
over the person of the impleaded party or
parties in accordance with and pursuant to the
provisions of the Rules of Court.
The authority to adjudicate granted to the
Commissioner under this section shall be
concurrent with that of the civil courts, but the
filing of a complaint with the Commissioner
shall preclude the civil courts from taking
cognizance of a suit involving the same subject
matter.
Any decision, order or ruling rendered by the
Commissioner after a hearing shall have the
force and effect of a judgment. Any party may
appeal from a final order, ruling or decision of
the Commissioner by filing with the
Commissioner within thirty (30) days from
receipt of copy of such order, ruling or decision
a notice of appeal to the Court of Appeals in
the manner provided for in the Rules of Court
for appeals from the Regional Trial Court to the
Court of Appeals.
For the purpose of any proceeding under this
section, the Commissioner, or any officer
thereof designated by him is empowered to
administer oaths and affirmation, subpoena
witnesses, compel their attendance, take
evidence, and require the production of any
books, papers, documents, or contracts or
other records which are relevant or material to
the inquiry.
A full and complete record shall be kept of all
proceedings had before the Commissioner, or
the officers thereof designated by him, and all
testimony shall be taken down and transcribed
by a stenographer appointed by the
Commissioner.
In order to promote party autonomy in the
resolution of cases, the Commissioner shall
establish a system for resolving cases through
the use of alternative dispute resolution.
TITLE 2
FEES AND OTHER SOURCES OF FUNDS
Section 440. (a) For the issuance or renewal of
certificates of authority, licenses and
certificates of registration, pursuant to pertinent
provisions of this Code, the Commissioner
shall collect and receive fees which shall be not
less than the following:
For each certificate of authority issued to an
insurance company doing business in the
Philippines, Two hundred pesos (P200.00).
For each special certificate of authority issued
to a servicing insurance company, One
hundred pesos (P100.00).
For each license issued to a general agent of
an insurance company, Fifty pesos (P50.00).
For each license issued to an insurance agent,
Twenty-five pesos (P25.00).
For each license issued to an agent of variable
contract policy, Twenty-five pesos (P25.00).
For each license issued to an insurance
broker, One hundred pesos (P100.00).
For each license issued to a reinsurance
broker, One hundred pesos (P100.00).
For each license issued to an insurance
adjuster, One hundred pesos (P100.00).
For each certificate of registration issued to an
actuary, Fifty pesos (P50.00).
For each certificate of registration issued to a
resident agent, Fifty pesos (P50.00).
For each license issued to a rating
organization, One hundred pesos (P100.00).
For each certificate of registration issued to a
non-life company underwriter, Fifty pesos
(P50.00).
For each license issued to a mutual benefit
association, Ten pesos (P10.00).
For each certificate of registration issued to a
trust for charitable uses, Ten pesos (P10.00).
All certificates of authority and all other
licenses, as well as all certificates of
registration, issued to any person, partnership,
association or corporation under the pertinent
provisions of this Code for which no expiration
date has been prescribed, shall expire on the
last day of December of the third year from its
issuance and shall be renewed upon
application therefor and payment of the
corresponding fee, if the licensee or holder of
such license or certificate is continuing to
comply with all the applicable provisions of
existing laws, and of rules, instructions, orders
and decisions of the Commissioner.
(b) For the filing of the annual statement
referred to in Section 229, the Commissioner
shall collect and receive from the insurance
company so filing a fee of not less than Five
hundred pesos (P500.00): Provided, That a
fine of not less than One hundred pesos
(P100.00) shall be imposed and collected by
the Commissioner for each week of delay, or
any fraction thereof, in the filing of the annual
statement.
For the filing of annual statement referred to in
Section 413, the Commissioner shall collect
and receive from the mutual benefit
association so filing a fee of not less than Ten
pesos (P10.00): Provided, That a fine of not
less than Ten pesos (P10.00) shall be imposed
and collected by the Commissioner for each
week of delay, or any fraction thereof, in the
filing of the annual statement.
(c) For the examination prescribed in Section
253, the Commissioner shall collect and
receive fees according to the amount of its total
assets, in the case of a domestic company, or
of its assets in the Philippines, in the case of a
foreign company, not less than the amount as
follows:
(1) Two million pesos or more but less than
Four million pesos, Four hundred pesos
(P400.00);
(2) Four million pesos or more but less than Six
million pesos, Eight hundred pesos (P800.00);
(3) Six million pesos or more but less than
Eight million pesos, One thousand two
hundred pesos (P1,200.00);
(4) Eight million pesos or more but less than
Ten million pesos, One thousand six hundred
pesos (P1,600.00);
(5) Ten million pesos or more, Two thousand
pesos (P2,000.00);
Provided, That if the said examination is made
in places outside the Metropolitan Manila area,
besides these fees, the Commissioner shall
require of the company examined the payment
of the actual and necessary travelling and
subsistence expenses of the examiner or
examiners concerned.
For the examination prescribed in Section 412,
the Commissioner shall collect and receive a
minimum fee of not less than One hundred
pesos (P100.00) from the mutual benefit
association examined: Provided, That if such
association has total assets of more than One
hundred thousand pesos (P100,000.00), an
additional fee of not less than Ten pesos
(P10.00) for every Fifty thousand pesos
(P50,000.00) in excess thereof shall be
imposed:
(d) For the filing of an application to withdraw
from the Philippines under Title 18, the
Commissioner shall collect and receive from
the foreign company so withdrawing a fee of
not less than One thousand pesos
(P1,000.00).
(e) The Commissioner may fix and collect fees
or charges for documents, transcripts, or other
materials which may be furnished by him not in
excess of reasonable cost.
Section 441. The Commissioner, in
accordance with the rules and regulations of
the Department of Budget and Management
and other relevant regulatory agencies, shall
source the salary, allowances and other
expenses from the retained amount of the fees,
charges, penalties and other income from the
regulation of insurance companies and other
covered persons and entities, and from the
Insurance Fund, which is created out of the
proceeds of taxes on insurance premiums
mentioned in Section 255 of the National
Internal Revenue Code, as amended.
MISCELLANEOUS PROVISIONS
Section 442. Any person, company or
corporation subject to the supervision and
control of the Commissioner who violates any
provision of this Code, for which no penalty is
provided, shall be deemed guilty of a penal
offense, and upon conviction be punished by a
fine not exceeding Two hundred thousand
pesos (P200,000.00) or imprisonment of six (6)
months, or both, at the discretion of the court.
If the offense is committed by a company or
corporation, the officers, directors, or other
persons responsible for its operation,
management, or administration, unless it can
be proved that they have taken no part in the
commission of the offense, shall likewise be
guilty of a penal offense, and upon conviction
be punished by a fine not exceeding Two
hundred thousand pesos (P200,000.00) or
imprisonment of six (6) months, or both, at the
discretion of the court.
Section 443. All criminal actions for the
violation of any of the provisions of this Code
shall prescribe after three (3) years from the
discovery of such violation: Provided, That
such actions shall in any event prescribe after
ten (10) years from the commission of such
violation.
Section 444. Any person, partnership,
association or corporation heretofore
authorized, licensed or registered by the
Commissioner shall be deemed to have been
authorized, licensed or registered under the
provisions of this Code and shall be governed
by the provisions thereof: Provided,
however, That where any such person,
partnership, association or corporation is
affected by the new requirements of this Code,
said person, partnership, association or
corporation shall, unless otherwise herein
provided, be given a period of one (1) year from
the effectivity of this Code within which to
comply with the same.
Section 445. Transitory Provision. – Renewal
of existing licenses, certificates of authority or
accreditation which will expire on June 30,
2013 shall be valid until December 31, 2015.
Thereafter, renewal shall be filed on the last
day of December every third year following the
date of expiry of the license, certificate of
authority or accreditation.
Section 446. Repealing Clause. – Except as
expressly provided by this Code, all laws,
decrees, orders, rules and regulations or parts
thereof, inconsistent with any provision of this
Code shall be deemed repealed, amended or
modified accordingly.
Section 447. Separability Clause. – If any
provision of this Code or any part hereof be
declared invalid or unconstitutional, the
remainder of the law or other provisions not
otherwise affected shall remain valid and
subsisting.

Section 448. This Code shall take effect fifteen

(15) days following its publication in a
newspaper of general circuation.

Approved,

(Sgd.) JINGGOY (Sgd.) FELICIANO

EJERCITO BELMONTE JR.
ESTRADA Speaker of the
Acting Senate House of
President Representatives

This Act which is a consolidation of House Bill

No. 4867 and Senate Bill No. 3280 was finally
passed by the House of Representatives and
the Senate on February 6, 2013.